Roberto Abraham Scaruffi

Tuesday 9 December 2014


Seeking the Future of Europe in the Ancient Hanseatic League


By Mark Fleming-Williams

A bargain, forged in the fires of 2012's economic emergency, has defined the European Union for the past two years. It was an agreement made between two sides that can be defined in several terms — the center and the periphery, the north and the south, the producers and the consumers — but essentially one side, led by Germany, provided finance, while the other, fronted by Spain, Portugal, Ireland and Greece, promised change. In order to gauge this arrangement's chances of ultimately succeeding, it is important to understand what Germany was hoping to achieve with its conditional financing. The answer to that question lies in Germany's own history. 
 

Last week, the Governing Council of the European Central Bank's monthly meeting left financial markets feeling frustrated. Instead of announcing the beginning of a highly anticipated bond-buying program known as quantitative easing, the European Central Bank, or ECB, only slightly changed the vocabulary it used to describe its plans: "We expect" became "we intend." Pulses did not race with excitement. 

In fact, the most interesting news of the day was that seven of the 22 members of the council apparently voted against the change in vocabulary. Those opposed included four governors of national central banks and three of the EU executive board's six members, who, in theory, are responsible for shaping ECB policy. This ongoing debate over finances is deeply important to Europe's future because it touches on a key question at the heart of the European project: Is Germany willing to underwrite the whole venture? Germany gave a partial answer to this question in 2012 when it financed the EU rescues of several member states, but the conditions it attached have since created more problems.

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