Decentralization of the Sovereigns & the Establishment of a European Sovereign Fiscal & Banking Union
The difference between federation & confederation needs to be addressed. The federation is mandatory membership whereas the confederation is voluntary. No particular member state has expressed intention on leaving the EU therefore, by default, the 27-member nation of the European Union is a sovereign federation. For the EU to govern effectively as a decentralized fiscal federation (taxation & regulation of financial activity) of non-EMU & EMU sovereigns, appointees to the supranationals (European Council, European Parliament, etc.), should collectively have the ability to promulgate the activity of the EMU & non-EMU to effectively decentralize the sovereigns and to ensure a level of confidence to investors. The aforementioned is a system of checks & balances that may be decided, if necessary, at the supranational level (power of attorney) by the European Council. The supranational entities will facilitate 3rd party activities including arbiter and provide leadership & oversight as necessary to enable the decentralized operation at each level of federalism to include the : sovereign (national), sub-sovereign (sub-national), and supra-sovereign (ex., Common Budget Committee).
The main fiscal decentralization mechanism with the goal of linking fiscal integration for the federation of sovereigns is via the Common Budget Committee & Common Banking Committee that seeks to align the EMU & non-EMU sovereigns with the strategic growth plan of the EU using input feedback from of the strategic planning committee of each sovereign & the Common Budget Committee. The oversight for the Common Budget Committee & for the unified banking system appointees should be under the auspice of the European Parliament. The European Commission should propose legislation to legally enable the appointees of the European Council to the European Parliament. The duration of the syndicate(s) & committee(s) may be initially set by the Commission, rather arbitrarily for approximately 50 yrs or in increments of 10yrs (incremental extensions approved by vote), until the supranational debt maturity obligations have been retired.
The organizational structure of the underlying EU-27 member coalition remains as a multi currency union. The 27-nation EU may adopt & approve the legislation to create an integrated banking system that is horizontally structured & connects the non EMU members of the EU-27, w/the EMU-17 members. The management of the chartered integrated banking system is through appointment of and EMU/non-EMU banking Executive Director. Each Executive Director will be responsible for the daily operations of their respective syndicate banking responsibility (syndicate banking is explained in greater detail, below). Each syndicate should separately charter a holding company to function as the syndicate arm under a linked, unified banking system.
The EMU banking syndicate operation should be guided under the auspice of an appointed EU banking President to oversee the EMU & non-EMU banking syndicate(s). Germany, France & Italy all have equal share of council votes however Germany holds the most seats in the European Parliament and therefore ostensibly has representative authority through majority to authorize legislation from the European Commission to establish syndicate banking authority effectively linking & integrating the ECB/IMF & the BoE/Bundesbank (Bundestag) as well as with each sovereign central bank and each national & subnational bank w/in each sovereign though Information Management via Information Technology with integrated internal accounting & fiscal controls (the spending will create jobs). Budget & banking approval of decisions may be rendered instantaneously.
The fiscal controls available through Information Management can enable the TARP needed to insure deposits as legislation proposed by the European Commission & ratified by the European Parliament will provide the necessary legal compliance to provide oversight on insuring interbank loans, overnight deposits, and on deposits-in-transit & on savings & checking accounts (€250,000 maximum for each (savings account ostensibly receiving primary consideration over the checking account) or €500,000 combined w/the savings account ostensibly receiving primary consideration). As insured banking funds may move from sovereign bank to sovereign bank, the movement of the underlying amount of funds or deposit-in-transfer is able to be monitored from the beginning bank account to the final bank account and ensured along w/the maximum allowable amount for insurable deposit of funds in the primary of beginning bank account.
The EU Parliament may also legislate to allow for extended use of financial instruments including covered bond private placement transferable bonds (registered bonds, bond power) to enable risk hedging and debt transfers, as needed, at the supranational & suprasovereign level(s). Germany, France, & Italy may back a trilateral baking agreement to form the Common Budget Committee signed by each sovereign, which is the decentralized link from each sovereign to the supranationals via the liaison (Common Budget Committee). The fiscal document is the political & economic expression of the decentralized sovereigns therefore the fiscal mechanism tacitly enables other socioeconomic & sociopolitical mechanisms to be expressed by each sovereign, legislated (if & when deemed as necessary), and put forth by the Common Sovereign Budget Committee to the banking syndicate (if & when deemed as necessary). The Common Sovereign Budget Committee may also liaison directly with the supranationals (if & when deemed as necessary).
The non-EMU banking trilateral agreement of the U.K., Poland, & Sweden (EU since 1995), (or alternatively Romania w/more seats held in the European Parliament), is established and will operate under the same guidelines as the EMU banking trilateral agreement and signed by all non-EMU sovereigns effectively expressing underlying representation of each sovereign for & by the Common Sovereign Budget Committee & the Common Banking Committee.
These actions will seek to establish a decentralized yet comprehensive banking authority aligned in conjunction with a decentralized fiscal federalism mechanism that can better track and price underlying risk of the entire sovereign banking system and allow sovereigns to interact with EMU & non-EMU banks that may hold underlying sovereign debt as risk exposure, which will allow for better fiscal due diligence of budget decisions & in compliance of promulgated legislation that seeks to improve investor confidence in the banking, fiscal & economic (growth) activities of the eurozone. An EMU sovereign may continue to act independently and w/out overriding jurisdictional authority though the oversight of the Common Budget Committee or supranational entity is the sovereign or its underlying banking system is not in need of a multi-sovereign bailout. A level of autonomy is necessary to ensure a primary level of sovereign freedom, which represents the fairness in the mechanism of decentralization of the fiscal & banking union.
The EMU syndicate holding company (represented by all EMU member of the EU) will issue and publicly auction (50yr, perpetuity) guaranteed euro bonds, needed to buy the covered bond private placement issues. The EMU holding company (acting as a banking syndicate, will have sovereign representation from all EMU members but will have financial representation via a supranational conglomerate, IMF/ECB/(ESM/EFSF)). The non-EMU will issue debt via the issue long-term maturities (50yr, perpetuity obligations) of covered bond private placements under the auspice of bond power (transferable, registered bonds), collateralized with precious metals as the primary asset class (secondary: currency; to hedge w/precious metals against i-rate & other underlying risk exposure). The covered bond private placement may be issued by either the EMU or non-EMU banking syndicate, which subsequently, effectively removes the underlying risk of default by shifting the risk to the underlying asset of precious metals held as covered collateral.
For example: Spanish banks seek (for arguments sake) €125B. The FROB (surpassing the government & negating the doubling of the underlying bailout) may directly recapitalize the banks through banking operations as described above as facilitated via the integrated banking system. The toxic debt held by the banks may be removed from the books in exchange for the holding of the corresponding value of the transferred covered bond private placement issued from the non-EMU banking syndicate. The covered bond private placement is then transferred to the EMU banking syndicate from each underlying sovereign Spanish bank (casa) through the FROB in exchange for the corresponding value in euro’s. Now the EMU banking syndicate holds the covered bond private placement issues which are asset backed. These issues may be packaged with any issues held by the non-EMU banking syndicate and sold as collateralized eurobonds, where maturity & principal risk are effectively hedged based on the time value of money as a function of weighted derivative movement of weighted underlying collateral. The growth of the underlying EU (EMU & non-EMU) is the support for the backing of the underlying assets that collateralize the covered bond private placements.
For example: The Spanish government has (x) amount of debt outstanding. The integrated fiscal & banking system can enable the Spanish government to remove the underlying debt obligations by holding the covered bond private placements received by either the EMU or non-EMU banking syndicate. The covered bond private placements are then transferred to the alternate entity (the entity that did not issue the covered bond private placement) for corresponding euros. The debt outstanding as purchased by the banking syndicate is now covered by the collateral held by the banking syndicate and can be packaged and sold as collateralized eurobonds. The relative stability of the underlying assets will enable low interest rates to which the eurobond rate should be very close to the underlying financing rate.
The covered bond private placements may be transferred throughout the unified banking system in exchange for the toxic debt amount as a function of the corresponding principal amount in euros. The remnants of the toxic debt is essentially removed from the balance sheet of the sovereigns & of the banks and onto the balance sheet of the banking syndicate, which has the underlying assets held in precious metals & currency to which the derivative debt instruments are the covered bond private placement issues. The covered bond private placement issues are bought by the EMU & non-EMU banking syndicate, which then is able to package & sell the covered bonds as eurobonds, which are backed by the covered bonds, which are collateralized by the underlying physical assets held on the balance sheet of each banking syndicate. The ECB and aligning central banks may continue to perform various banking operations pertaining to monetary policy such as asset purchasing of financial instruments that may seek to hedge against underlying risk to the German taxpayer. The non-EMU banking syndicate may elect to operate though the open market operations of the Bank of England to perform open market monetary policy asset purchasing operations and additional hedging against financial risk to the underlying sovereigns.
The issuing & financing of the eurobonds is via the EMU syndicate, which will transfer covered bond private placement bond purchases to the non-EMU syndicate for the EMU syndicate will receive in return the equivalent in euro’s. The EMU syndicate will issue the eurobonds at public auction, made available to the G20 and all bidders in the global community The EMU syndicate will be responsible for interest payments to the non-EMU syndicate which is underlying the financing of the eurobond issues.
For all debt issued by each of the two banking syndicates, each transaction, individually or in whole, must be ratified by the Common Budget Committee, which (by vote) may be granted legislative power of attorney by the European Parliament under the auspice of the European Council. The underlying funding arm of the ESM is distributed based on expressed language and semantics governed under the auspice of Article 136 of the TFEU. The underlying risk exposure of ESM primarily to Germany, France, & Italy to which EMU members are concerned about taking ESM bailout funds due to the level of autonomy sacrificed. The ESM however, is able to purchase debt issued from either banking syndicate thereby releasing its store of euros and thus enabling the process of the funding the banks & sovereigns by purchasing & refinancing the secured debt (sovereign debt & bank loans), and mark-to-market non-secured debt. Funds from the EFSF may be disseminated via the same protocol and mechanism as the EFSF can purchase secured debt issued by the banking syndicate. The EFSF is really a bailout funding arm of the EU that is is financed by Finland. The non-EMU banking syndicate is designed to mitigate the underlying interest rate & principal risk exposure to Finland to the EFSF via decentralization.
The idea is to decentralize the risk exposure from any single sovereign with underlying exposure to the ECB/IMF, ESM and/or EFSF. The idea is to also use the aforementioned liquidity vehicles to purchase marked down government & banking debt while continuing to decentralize the risk exposure to the underlying sovereigns by issuing eurobonds or ‘Deutsche land bonds’, which will enable the reissue of restructured debt from the sovereign level to be made at the supranational level and to be reissued to global economies as 50 yr or perpetuity issues at relatively low interest rates. The bonds are backed by underlying assets as well as taxes from banks (earnings received from recapitalization) and from governments via bond issues (interest paid via tax receipts). In the end, debt to GDP should be reduced as a strategic growth plan for the sovereigns is facilitated by the sovereigns to expand the economy and increase private earnings, wage growth, growth in tax receipts, and GDP growth. The integrated fiscal & banking system will be able to track taxable transactions & receipt amounts via the internal fiscal & banking (managerial accounting & monetary economic) controls afforded w/in the system of Information Management.
Each underlying sovereign is able to start to fund growth by initially reducing the unemployment rate via the use of income in-kind, which puts the unemployed on the government ‘payroll’. As stated in a previous release, the income in-kind is ‘paid’ for services rendered to which transactions are denominated in euro’s, thereby reintroducing the economic velocity of fiat exchange w/in the sovereign.