Entries Tagged as 'Debt Crisis'

One Continent, Under France and Germany

December 7th, 2011 at 12:00 am 7 Comments

Looks like the EU has found an alternative to German domination of everybody else. It’s French-German domination of everybody else.

The grand “deal” announced earlier this week has something for both France and Germany. For the Germans, France will temporarily stop talking about eurobonds and will agree to automatic sanctions for violation of new budget rules. For the French, those automatic sanctions can be cancelled by a supermajority vote of unknown quantum, but very likely guaranteeing that France will never be sanctioned for its serial ambivalence toward budget rules, whether their own or anyone else’s.

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The EU’s Plan: Raise Taxes With Bailouts

December 1st, 2011 at 1:44 am 20 Comments

The past two weeks have seen a dizzying array of proposals from virtually every organ of the EU claiming that they can make the eurozone more efficient, for sale durable, case and solvent. If you noticed that no one is saying that they will make the eurozone more democratic, you’re not the only one. The most anti-democratic organ which is being set up is a permanent bailout fund, the European Stability Mechanism (EMS).

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Poland to Germany: We Need You to Act!

David Frum November 28th, 2011 at 7:50 pm 39 Comments

In an important speech in Berlin, Poland’s Foreign Minister Radek Sikorski expressed a thought maybe has never been heard before on German soil from a Polish leader:

What, as Poland’s foreign minister, do I regard as the biggest threat to the security and prosperity of Poland today, on 28th November 2011? It’s not terrorism, it’s not the Taliban, it’s certainly not German tanks. It’s not even Russian missiles which President Medvedev has just threatened to deploy on our border. The biggest threat to the security of Poland would be the collapse of the Eurozone.

And I demand of Germany that, for your own sake and for ours, you help it survive and prosper. You know full well that nobody else can do it. I will probably be first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.

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The Euro? Um, Next Question Please

David Frum November 10th, 2011 at 8:32 am 69 Comments

Last night, the CNBC anchors addressed the most urgent economic question of the moment – the fate of the euro – to four of the Republican presidential candidates: Herman Cain, Mitt Romney, Ron Paul and Jon Huntsman.

I want to begin with what we saw today, another rough day for our money, for our 401(k)s. Once again, we were all impacted by the news that the Dow Jones Industrial Average dropped 400 points today. The reason, Italy is on the brink of financial disaster.

It is the world’s seventh largest economy. As president, what will you do to make sure that their problems do not take down the U.S. Financial system? It is the world’s seventh largest economy.

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Europe’s Greatest Deficit is its Democracy

November 7th, 2011 at 1:46 pm 46 Comments

Though his actions quickly descended into farce, healing soon-to-be-former Greek Prime Minister Papandreou had the right instinct calling for a referendum on the austerity package that European negotiators are imposing on his country. There has been a long-stranding “democratic deficit” within the European Union, with major decisions being made without the input of the Union’s citizens. The latest crisis is only increasing this deficit.

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Will Britain Pay to Save the Euro?

November 3rd, 2011 at 5:34 pm 7 Comments

David Cameron also has a referendum problem. Britain’s current government uneasily combines euro-skeptics and euro-enthusiasts. Two weeks ago, shop 81 Conservative backbenchers broke with party leaders to vote in favor of a new referendum on Britain’s EU membership.

Cameron had promised such a referendum when he was in opposition, case but he has abandoned that commitment in his coalition with the euro-enthusiast Liberal Democrats.

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Alan Greenspan: Wrong on the Euro

October 26th, 2011 at 1:59 pm 33 Comments

Former Fed Chairman Alan Greenspan has been reenforcing the conventional wisdom that the current eurozone debt crisis can be traced to a north-south cultural divide between member states. This is the wrong assessment and blaming culture misses the essence of the problem. The reality is that the structure of the euro was unable to enforce fiscal discipline.

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Debt Crisis? Really?

David Frum July 29th, 2011 at 9:28 am 45 Comments

As of this morning, international investors stood ready to lend money to the US government for 10 years at a rate of 2.94%. They would lead for 2 years at a rate of 0.41%.

And we’re supposed to believe that it’s markets that are forcing this borrowing crisis?

Hoover Event Draws Crowd Amid Debt Crisis

July 23rd, 2011 at 12:24 pm 14 Comments

Despite the  apocalyptic debt crisis, Friday’s launch of Margaret Hoover’s book American Individualism drew a large crowd from the D.C. political scene. The event, held at the Hotel Monaco, was co-sponsored by GOProud.

GOP Message of the Day: Retreat!

David Frum July 13th, 2011 at 9:06 am 263 Comments

The McConnell plan offered Republicans an ingenious exit from the debt-ceiling confrontation: the debt ceiling would be raised in exchange for a series of theatrical votes over the next 18 months designed to showcase the Obama administration’s extravagance.

Conservatives in the media are reviling the plan, and early supporters (like Americans for Tax Reform) have quickly retracted their support.

John Boehner’s attempts to negotiate a grand bargain have likewise run aground on the Obama administration’s insistence that any “grand bargain” include some revenue measures.

Yet I think I can also perceive a dawning awareness among House Republicans of the financial and political dangers of the crisis they have created. This awareness has created a potential demand for a more chest-thumping exit from the crisis than McConnell offered. Call it McConnell-plus.

Bill Kristol outlines just such a plan in today’s Weekly Standard.

1) House Republicans vote for their ideal solution (eg the House Study Committee’s cap-cut-and-balance plan) as a House-only measure. That vote (it’s hoped) will mollify angry party activists that the House GOP has not sold out.

2) House Republicans vote for a law that prioritizes Social Security pay and defense over other federal obligations in the event of a cash crunch.


3) Plan C:

Plan C would be pursued when and if House Republicans judge that the debt ceiling does, at the end of the day, have to be raised—if they do come to that determination. In that case, House Republicans would of course continue to make clear they will not entertain any debt ceiling increase that includes tax hikes or irresponsible defense cuts. But House Republicans could permit a debt ceiling hike without tax hikes and irresponsible defense cuts if such legislation were to pass. No Republican would need to vote yes. Republicans would take the position that the president says the debt ceiling must be raised. Fine. Let him raise it—with only Democratic votes.

That’s easy in the Senate, where the GOP is in the minority. The 47 Senate Republicans would just vote no, and a few of them would agree not to filibuster the Democrats’ debt hike, so as not to obstruct the president and the Democrats. Nor need the Republican-controlled House stand in the way of the desire of the president and Democrats to incur more debt. House Republicans could allow Democrats to pass a no-tax-hike, no-gutting-of-defense version of a debt ceiling hike in the House. Speaker Boehner would have to round up (if I’ve done the math correctly) 48 Republican members who would agree to vote present on such a debt limit increase. The other 192 GOP members would vote no. The 193 Democrats would be welcome to vote yes and to pass the bill.

Such a measure wouldn’t do any policy damage, and it might even have some modest spending cuts. Obama and the Democrats would be unambiguously responsible for heaping two trillion dollars more debt on the American public—following on their unambiguous responsibility for the failed stimulus and for Obamacare. Republicans would be ready to make the case for the next year and a half for why Obama, and the Democrats, have to go.

The Kristol Plan “C” represents an even more abject retreat than the McConnell plan. This is retreat without even the McConnell kabuki theater as consolation prize. This is retreat that throws Republicans on the mercy of the Democrats to rescue the GOP from a predicament the GOP created for itself.

Bottom line: The House Republicans will offer up 48 of their members to vote for a “clean” increase in the debt ceiling if only Nancy Pelosi will whip her members into doing the heavy lifting of raising the debt ceiling.

Question: Can 48 such martyrs be found? After all, the Republicans with the safest seats also come from the most conservative districts. What if they refuse to put their careers on the line? What if they say “not me?”

Question 2: Why should the Democrats rescue the Republicans? Because their president asked them to? That logic did not move House Republicans when President George W. Bush asked them to vote for TARP in 2008. They said, “The Democrats have the majority, they can pass your emergency measure.”

Question 3: If it is House Democrats plus 48 sacrificial Republicans who raise the ceiling, what stops the Democrats from attaching their conditions? Such as, non-deductibility of corporate jets, or more funding for PBS? Humiliating conditions just to underscore who won this crisis and who lost?

Question 4: We’ve now had two eminent Republicans – McConnell and Kristol – offer Republicans escape routes from the crisis. Are these plans harbingers of the bigger stampede to come, as the deadline gets closer and the consequences of financial collapse become clearer?