German Chancellor Angela Merkel wants states to give up some sovereignty in return for Germany’s cash in future bailouts of bankrupt member states, according to Der Spiegel.
Chancellor Merkel is trying to create an organised bankruptcy proceeding for eurozone member states that will see investors, members, and the bankrupt country share the burden of the bailout. This is different than the current scenario, which sees investors and members bear the majority of the burden.
The designing of this new scheme is being done behind the scenes because Merkel’s government is concerned it might jeopardize the current Greek bailout, according to Der Spiegel.
The organiser of the bankruptcy would be the new Berlin Club, which would have the right to takeover some sovereign power from the bankrupt state.
Zero Hedge is sure this would be met with “howls of protest” and we agree. Member states will not want to give up the power over their purse strings to Berlin, regardless of how indebted they are.
They may have no choice, however, if they want to remain in the eurozone.
If current structural imbalances remain, they may prefer to leave.
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