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Thread: The European Stability Mechanism

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    The European Stability Mechanism

    link: European Council - European Stability Mechanism Treaty (ESM)

    direct link to the document in Eng: http://www.european-council.europa.e...tesm2.en12.pdf

    I shall present here the most disturbing facts about this treaty. The ESM is basically another bank... like the ECB or the IMF, but with more power than the Federal Reserve in the USA. You will see soon enough. As it stands now, sometime next year, this treaty could kick into effect. It should have been this year, but due to legal complications in a few countries, including Germany, it couldn't happen.

    The first 2 chapters discuss organization and structure mechanisms, though there is a lot of **** to deal with there, I will strictly go on with the things that bother me the most, starting from chapter 3 -> capital.

    Chapter 3 - Capital
    art 8.
    1.The authorised capital stock shall be EUR 700 000 million. It shall be divided into seven
    million shares, having a nominal value of EUR 100 000 each, which shall be available for
    subscription according to the initial contribution key provided for in Article 11 and calculated in
    Annex I.

    4. ESM Members hereby irrevocably and unconditionally undertake to provide their
    contribution to the authorised capital stock, in accordance with their contribution key in Annex I.
    They shall meet all capital calls on a timely basis in accordance with the terms set out in this Treaty.

    art 9.

    1. The Board of Governors may call in authorised unpaid capital at any time and set an
    appropriate period of time for its payment by the ESM Members.
    2. The Board of Directors may call in authorised unpaid capital by simple majority decision to
    restore the level of paid-in capital if the amount of the latter is reduced by the absorption of losses
    below the level established in Article 8(2), as may be amended by the Board of Governors
    following the procedure provided for in Article 10, and set an appropriate period of time for its
    payment by the ESM Members.
    3. [...] ESM shall have sufficient funds
    to meet payments due to creditors in full on their due date. ESM Members hereby irrevocably and
    unconditionally undertake to pay on demand any capital call made on them by the
    Managing Director pursuant to this paragraph, such demand to be paid within seven days of receipt



    all of articles 16, 17 and 18

    article 19 states that the board of governors can change said articles whenever they feel like it. In those articles, the ESM can force a country to pay off its debt or duties towards the ESM by the usage of bonds. They could change it in anything the hell they want without having to check anybody.

    Oh look, article 22.

    ARTICLE 22
    Investment policy
    1. The Managing Director shall implement a prudent investment policy for the ESM, so as to
    ensure its highest creditworthiness, in accordance with guidelines to be adopted and reviewed
    regularly by the Board of Directors. The ESM shall be entitled to use part of the return on its
    investment portfolio to cover its operating and administrative costs.
    2. The operations of the ESM shall comply with the principles of sound financial and
    risk management.

    See how little it is being written in regards to their duties and obligations with their money? Just to comply with the principles of sound financial and risk management... and there are full pages long articles that talk about their powers and the obligations of ESM members (which is most of the EU) but when it comes to these guys, blank.

    moving on, art 25.

    1. Losses arising in the ESM operations shall be charged:
    (a) firstly, against the reserve fund;
    (b) secondly, against the paid-in capital; and
    (c) lastly, against an appropriate amount of the authorised unpaid capital, which shall be called in
    accordance with Article 9(3).
    2. If an ESM Member fails to meet the required payment under a capital call made pursuant to
    Article 9(2) or (3), a revised increased capital call shall be made to all ESM Members with a view
    to ensuring that the ESM receives the total amount of paid-in capital needed. The Board of
    Governors shall decide an appropriate course of action for ensuring that the ESM Member
    concerned settles its debt to the ESM within a reasonable period of time. The Board of Governors
    shall be entitled to require the payment of default interest on the overdue amount.
    3. When an ESM Member settles its debt to the ESM, as referred to in paragraph 2, the excess
    capital shall be returned to the other ESM Members in accordance with rules to be adopted by the
    Board of Governors.

    this pretty much says that the guys in charge can lose money and then ask for bailouts and the ESM members have to do it without asking questions. At least the US Congress has the right to observe and regulate the Federal Reserve, here, ESM members can't even do that.

    Moving on... articles 28 and 29 discuss auditing. This will be interesting. I'm sure they have some bulletproof auditing mechanisms in place to make sure they don't squander the money and their duties.

    ARTICLE 28
    Internal Audit
    An internal audit function shall be established according to international standards.

    Are you kidding me.. this is all there is on internal auditing? Really? No specifications, nothing?... Well, I'm sure external auditing will be more thorough.

    ARTICLE 29
    External audit
    The accounts of the ESM shall be audited by independent external auditors approved by the Board
    of Governors and responsible for certifying the annual financial statements. The external auditors
    shall have full power to examine all books and accounts of the ESM and obtain full information
    about its transactions

    You must be ****ing kidding me... so nobody can audit the ESM without the people in charge of the ESM saying so? You must be ****ing kidding me. Even the Federal Reserve can be forcefully audited by Congress. I mean... the ESM countries just pay the money and then don't have any say in anything? Is this a ****ing joke? Wait, it gets better.

    ARTICLE 30
    Board of Auditors
    1. The Board of Auditors shall consist of five members appointed by the Board of Governors for
    their competence in auditing and financial matters and shall include two members from the supreme
    audit institutions of the ESM Members - with a rotation between the latter - and one from the
    European Court of Auditors.

    ...

    2. The members of the Board of Auditors shall be independent. They shall neither seek nor take
    instructions from the ESM governing bodies, the ESM Members or any other public or
    private body.

    No, they just get appointed by the Board of governors. How the **** are they supposed to be independent? Really? this is a joke.

    5. The Board of Governors shall make the annual report accessible to the national parliaments
    and supreme audit institutions of the ESM Members and to the European Court of Auditors.

    Oh, so at least we will be allowed to read the findings on the auditors who are appointed by the people in charge of the ESM. Great. Thank you, kind overlords.
    6. Any matter relating to this Article shall be detailed in the by-laws of the ESM.
    So... what? free hand to do whatever they want? It doesn't matter really... they already can change whatever laws they want because other articles say so.


    But things don't get really juicy until you reach article 32.

    ARTICLE 32
    Legal status, privileges and immunities
    1. To enable the ESM to fulfil its purpose, the legal status and the privileges and immunities set
    out in this Article shall be accorded to the ESM in the territory of each ESM Member. The ESM
    shall endeavour to obtain recognition of its legal status and of its privileges and immunities in other
    territories in which it performs functions or holds assets.
    2. The ESM shall have full legal personality; it shall have full legal capacity to:
    (a) acquire and dispose of movable and immovable property;
    (b) contract;
    (c) be a party to legal proceedings; and
    (d) enter into a headquarter agreement and/or protocols as necessary for ensuring that its legal
    status and its privileges and immunities are recognised and enforced.
    3. The ESM, its property, funding and assets, wherever located and by whomsoever held, shall
    enjoy immunity from every form of judicial process except to the extent that the ESM expressly
    waives its immunity for the purpose of any proceedings or by the terms of any contract, including
    the documentation of the funding instruments.
    4. The property, funding and assets of the ESM shall, wherever located and by whomsoever
    held, be immune from search, requisition, confiscation, expropriation or any other form of seizure,
    taking or foreclosure by executive, judicial, administrative or legislative action.
    5. The archives of the ESM and all documents belonging to the ESM or held by it, shall
    be inviolable.
    6. The premises of the ESM shall be inviolable.
    7. The official communications of the ESM shall be accorded by each ESM Member and by
    each state which has recognised the legal status and the privileges and immunities of the ESM, the
    same treatment as it accords to the official communications of an ESM Member.
    8. To the extent necessary to carry out the activities provided for in this Treaty, all property,
    funding and assets of the ESM shall be free from restrictions, regulations, controls and moratoria of
    any nature.
    9. The ESM shall be exempted from any requirement to be authorised or licensed as a credit
    institution, investment services provider or other authorised licensed or regulated entity under the
    laws of each ESM Member.


    yes well, if you read all 9 points you will see what the definition of legal immunity is. These guys and the institution they run are perfectly immune to ANYTHING. If they put the ESM stamp on a document that says that all Europeans are morons and then they throw it out on the streets of Luxemburg where their HQ is, you are not allowed to present that as evidence ANYWHERE. But wait, there's more... in art 34, 35 and beyond.

    ARTICLE 34
    Professional secrecy
    The Members or former Members of the Board of Governors and of the Board of Directors and any
    other persons who work or have worked for or in connection with the ESM shall not disclose
    information that is subject to professional secrecy. They shall be required, even after their duties
    have ceased, not to disclose information of the kind covered by the obligation of
    professional secrecy.

    ARTICLE 35
    Immunities of persons
    1. In the interest of the ESM, the Chairperson of the Board of Governors, Governors, alternate
    Governors, Directors, alternate Directors, as well as the Managing Director and other staff members
    shall be immune from legal proceedings with respect to acts performed by them in their official
    capacity and shall enjoy inviolability in respect of their official papers and documents.
    2. The Board of Governors may waive to such extent and upon such conditions as it determines
    any of the immunities conferred under this Article in respect of the Chairperson of the Board of
    Governors, a Governor, an alternate Governor, a Director, an alternate Director or the
    Managing Director.
    3. The Managing Director may waive any such immunity in respect of any member of the staff
    of the ESM other than himself or herself.
    4. Each ESM Member shall promptly take the action necessary for the purposes of giving effect
    to this Article in the terms of its own law and shall inform the ESM accordingly.


    Gods on earth these guys are... can't be touched.

    ARTICLE 36
    Exemption from taxation
    1. Within the scope of its official activities, the ESM, its assets, income, property and its
    operations and transactions authorised by this Treaty shall be exempt from all direct taxes.
    2. The ESM Members shall, wherever possible, take the appropriate measures to remit or refund
    the amount of indirect taxes or sales taxes included in the price of movable or immovable property
    where the ESM makes, for its official use, substantial purchases, the price of which includes taxes
    of this kind.


    And there is much more. Please read the entire treaty and if you live in any country that is in Schengen, for your own sake, spread awareness. I mean it... so few people know about this treaty its painful. It will be pushed under the rug as soon as certain legal issues in the countries which aren't compatible Constitutionally with the treaty will be resolved... this includes Germany and a few more. Please, for the sake of european people and Europe itself, publicize this and spread awareness. This is a treaty of slavery.

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    Re: The European Stability Mechanism

    Those countless rules and regulations drive me mad!

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    Re: The European Stability Mechanism

    That is pretty disturbing, but I am not surprised. There is a reason I don't like EU too much, and it is not because I am against Europeans cooperating with each other.

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    Re: The European Stability Mechanism

    Quote Originally Posted by Rainman05 View Post
    link: European Council - European Stability Mechanism Treaty (ESM)

    direct link to the document in Eng: http://www.european-council.europa.e...tesm2.en12.pdf

    I shall present here the most disturbing facts about this treaty. The ESM is basically another bank... like the ECB or the IMF, but with more power than the Federal Reserve in the USA. You will see soon enough. As it stands now, sometime next year, this treaty could kick into effect. It should have been this year, but due to legal complications in a few countries, including Germany, it couldn't happen.
    Jesus f'ing christ... These people have no idea what they're getting themselves into...

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    Re: The European Stability Mechanism

    Quote Originally Posted by Camlon View Post
    That is pretty disturbing, but I am not surprised. There is a reason I don't like EU too much, and it is not because I am against Europeans cooperating with each other.
    I suppose this was one price that has to be paid for future market stability in Europe, there was already a stability mechanism: namely the "European Financial Stability Facility" which was created in 2010 as a temporary rescue for the debt crisis but that didn't bring confidence and so much more drastic measures had to be brought in such as originally proposed by Angela Merkel and Nicolas Sarkozy.

    Strange thing is that although the ESM is currently in the stages of replacing the EFSF, it was the European Central Bank under Mario Draghi that began to bring some calm to the markets.

    Quote Originally Posted by Rainman05 View Post
    -- This is a treaty of slavery.
    Most people around the world are already slaves to the whims of the financial markets. I don't like the measures within the ESM but I can understand why the bureaucrats felt they needed to take such drastic measures to ensure stability.

    Out of interest, what would be your take to resolve the international market crisis and bring stability?

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    Re: The European Stability Mechanism

    Quote Originally Posted by Infinite Chaos View Post

    Out of interest, what would be your take to resolve the international market crisis and bring stability?
    I know this wasn't directed at me, but I'd like to answer it anyway. The solution is the one solution they refuse to accept: Get rid of the euro. You don't need to dissolve political ties, just get rid of the common currency. Countries sharing a currency is the equivalent of a neighborhood sharing the same bank account. Some neighbors will be frugal and earn a lot, others will earn little and spend much. A currency should be a direct representation of a nation's financial health. When problems arise, the varying exchange rate equalizes out most issues.

    There are only two options for europe:
    - Continue throwing money at the problem, remove all financial freedom for the individual nations and become the United States of Europe.
    or
    - Get rid of the euro, and be best friends without sharing a bank account.

    Unfortunately the politicians are hell-bent on the former.

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    Re: The European Stability Mechanism

    Quote Originally Posted by RabidAlpaca View Post
    I know this wasn't directed at me, but I'd like to answer it anyway. The solution is the one solution they refuse to accept: Get rid of the euro. You don't need to dissolve political ties, just get rid of the common currency.
    The problem with this is the fallout of leaving a currency - what that would do to the nation leaving, the debtors and creditors as the new/old currency they leave for loses it's worth and the instability that would be caused. If it was an easy solution then Greece would have probably been kicked out of or willingly left the euro in 2009.

    Quote Originally Posted by RabidAlpaca View Post
    Countries sharing a currency is the equivalent of a neighborhood sharing the same bank account. Some neighbors will be frugal and earn a lot, others will earn little and spend much. A currency should be a direct representation of a nation's financial health. When problems arise, the varying exchange rate equalizes out most issues.
    The horse has bolted the stable but essentially you're right however if the proposed members of the euro had used far more rigorous due diligence then this would have been avoided and the Europ could have been a real powerhouse of a currency and the zone itself would be quite an engine of growth. Unfortunately (IMO) countries like Greece, Portugal, Ireland etc etc were included and their books weren't properly scrutinised. I feel it is the same with the European Union too in that a smaller club of wealthy / industrialised nations would have made a more effective union. However I can understand why some wealthy nations wished for poorer countries with lower labour costs to join.

    Quote Originally Posted by RabidAlpaca View Post
    There are only two options for europe:
    - Continue throwing money at the problem, remove all financial freedom for the individual nations and become the United States of Europe.
    or
    - Get rid of the euro, and be best friends without sharing a bank account.

    Unfortunately the politicians are hell-bent on the former.
    I wish there were more options, I think countries have strapped into a straitjacket where ever closer union seems the only answer. For the reasons I outlined before I don't think there will be a removal of the euro unless it totally collapses as a currency - presently it is unlikely to do that as it remains a major world currency and even though it has slipped against other currencies it is still a strong currency to do trade with.

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