By the Staff at AFP
A massive new European financial organization called the European Stability Mechanism (ESM) is primed to become the region’s mega-bank, more powerful than even the European Central Bank. If all the euro zone countries ratify the ESM agreement, it will come to life on January 1, 2013. But in reality it is expected to cause mayhem for Europe, with Germany again being accused of initiating a financial war if they don’t pay the lion’s share of the ESM’s funding. Already politicians in many countries have started the “we hate Germany” chants.
Under the ESM, 700B euros will be collected from member countries into one big pot. Over the course of five years, members will be expected to fork over 20% each year of the amount that is expected from them. At over 190B euros, the German contribution is by far the largest. The second-largest contribution, of 140B euros, will come from France. This money will then be loaned out to the neediest—at interest, of course.
How bankrupt member countries will be able to make the funding payments in the first place does not concern Brussels. If they can’t pay, they will still get to keep their place at the ESM trough. Germans are concerned that they will be asked to make up the difference.
The Germans, who are still burdened by reparation payments, have not had a balanced budget in the last decade and are effectively broke themselves. In 2011 alone, Germany paid out 562M euros in reparations to the rest of the world. These numbers are not known by most Germans.
The difference here, however, is that the German economy is still strong and is expected to rebound, unlike other European countries such as Ireland, Greece, Spain, Portugal and Italy.