Polularist Heroes: Angela Merkel, Nicolas Sarkozy. NOT.

[denem]

A little historical perspective on the current G20 dispute.

1. Fiscal Stimulus: Sarkozy & Merkel are conservatives, elected on platforms of 'fiscal responsibility' and welfare reform. When the gloss wore of the slogans and details were announced, both faced passionate public uprisings. Most of the initiatives were then shelved.

2. Financial Regulation: When the Euro was established, Eurozone rules were established to enable the ECB to continue the 'strong currency', inflation first' tradition of the Deutsche Bank it replaced. The ECB has always erred on the side of tight money and relatively high unemployment, an policy defused somehat by the fair to good Welfare safely nets of the more wealthy EU nations.
Thus the burden of tight money fell onto welfare, and national budget's.

What Sarkozy & Merkel are proposing is an embryonic international regulatory authority, built on representatives of G20 regulators and beyond. It's at best an ambit claim, taking the ECB as a starting point. No thanks!

3. Toxic Assets. The Eurozone did no more to regulate derivatives, swaps, tax shelters than anything else. Outside the UK, there was been no ER policy proposals to loosen the credit crunch, rather a cases vague case by assurace of something like IMF intervention (with IMF like strings attached. 'You (Bulgaria/UK etc) caused it, you deal with it.', the EU retorts, with some justification. One reason there is less urgency here is the $$$ of toxics being redeemed by up by AIG and the US Treasury, soon to be auctioned , at fire sale prices.

Perhaps TARP II could be rechristened, Marshall II. But when you hear 'Sarkozy & Merkel' oppose new fiscal stimulus, get you own house in order, ask yourself how the GOP voted in the House.

[MannyGoldstein]

1. Why Are Their Proposals Bad?

You say that they, personally are Conservatives (although that is a very different thing in Europe than in the US).

Without central regulation, money will flow into whichever country permits the most opaque banking, thus running the high risk of yet another world economic crisis that Summers can use as an excuse to hand my earnings to bankers. What's the alternative, in your view?

[Raineyb]

2. In their defense, their countries have more of a safety net they probably don't need to

stimulate their economies the way we do here.

On the other hand, conservatives in Europe are not like the jagoffs we have calling themselves conservatives here and I don't see what's wrong with having some kind of international banking regulations. Manny Goldstein is right, if we don't do something about the banking rules the banks will move to whichever country has the least transparent rules where they can continue to create their exotic debt obligations in whatever fraudulent way they see fit only to repeat the cycle we're currently on the downside of. Without some kind of banking rules reform this will happen again which is the opposite of what needs to happen. We can never allow something like what's going on now to ever occur again.

Regards

[Thrill]

3. For all their tough talk. They ended up giving more than first thought