German Economists Mobilize Against ESM
July 11, 2012 (EIRNS)—On July 5, a group of 172 German economists put out a public declaration denouncing the European Stability Mechanism (ESM) and calling on citizens to mobilize nationwide. Initiated by Prof. Hans-Werner Sinn, president of the Munich Ifo Institute, the appeal has been signed by numerous "heavyweights" in the world of economics, such as Prof. Klaus Zimmermann, former head of the German Institute for Economic Research (DIW); Freiburg economist Prof. Bernd Raffelhüschen; and Dortmund statistics Prof. Walter Krämer.
Crafted in remarkably non-academic language in order to have a broad public impact, the appeal asserts that the planned European banking union will only
"help Wall Street, the City of London—as well as some investors in Germany—and a bunch of domestic and foreign banks.... They thus can continue their business at the expense of citizens in other countries, who have little to do with this."
A banking union, the professors correctly point out, means "collective liability for the debts of the euro system," adding that
"bank debts are almost three times as large as the sovereign debt and, in the five crisis countries, lie in the range of several trillion euros."
Taxpayers, pensioners, and savers of the still solid countries "cannot be held liable for covering these losses," the declaration states, demanding that
"banks must be allowed to fail. If the debtors cannot pay back, there is only one group, which should take on the burden and is able to do so: the creditors themselves, since they entered the investment risk consciously and they are the only ones who have the needed wealth."
The appeal falls short of calling for Glass-Steagall legislation, but it does have the potential to move in that direction.