The EU’s solution seals its painful fatePosted on October 10, 2011
Apologies for the lack of posts for the last few days – a switch of server combined with a busy week conspired to keep me away from the keyboard.
The biggest news, which cannot be ignored, is the so-called “solution” to the Eurozone crisis. As some have pointed out, it would be surprising if the EU’s leaders were even able to agree on a workable dinner menu for the summit, never mind a unifying solution to the vast economic crisis that they have created through their political foolishness and fiscal blindness.
So claims that they’ve got it all sewn up and everything is going to be fine should raise our suspicions. Lo and behold, as soon as you look at the plan the problems are clear. The BBC’s three-bullet summary of the package is as follows, with my comments in bold:
- Banks holding Greek debt would accept a 50% loss
Forgive me for pointing it out, but Europe’s banks – and still less the rest of the world’s – are not run by the EU Commission or the premiers of member states. The precedent of politicians enforcing these losses in a laughably named “voluntary” deal is dangerous and will further deter international investors from backing EU ventures.
- A mechanism to boost the eurozone’s main bailout fund to about 1tn euros (£880bn; $1.4tn)
Where is the money coming from? If as many suggest it will be from sovereign wealth funds from around the world, what financial and political price do we expect Saudi Arabia and China to demand in return for stepping in?
- Banks must also raise more capital to protect them against losses resulting from any future government defaults
Yes, having enforced 50% losses on the banks who lent to Greece, the EU is now attacking them for not having enough capital. Again, where will the money come from? The Eurozone crisis has severely damaged global confidence in European economies and businesses, and we’re not exactly awash with credit at the moment. If the markets won’t bet their house on the dodgy nag which is the Eurozone, will we see Governments stepping in? If so, err, isn’t it Government indebtedness which is already the problem driving this crisis?
Just as worryingly, can anyone rely on Italy, Greece and other Eurozone flops to carry out the reforms needed to become competitive and shed their zombie economy status? Sure, they may be pledging to now, but they pledged to when they joined the Euro and signally failed to live up to their promises and treaty pledges.
Most disturbing of all, we are also seeing a trend amongst the EU elites – emphatically separate to the peoples of Europe – towards a “consensus” in favour of fiscal union. The architects of European integration have never been ones to let a good crisis go to waste, so behind their furrowed brows and mutters of concern there can be little down that plenty of them are jumping for joy about the prospect of Brussels siezing power over the budgetary affairs of 17 countries.
If you think the EU is undemocratic and bossy now, you’d be right – but this is a walk in the park compared to what will happen when the EU Budget Inquisition start stretching national Chancellors on the rack until they agree to obey the diktats flowing from Brussels.The protests and chaos in Athens will multiply and spread to other countries once Brussels starts to enforce its measures against the will of voters across Europe with a minimum of accountability.
Of course, the EU’s own accounts are famously full of holes, and fraud and waste are rife, so even if they get this central bullying power we can be certain they will fail to use it responsibly or successfully. There will be pain without any gain – a further recipe for disillusionment and disturbance.
Critics of the EU – including myself – have long said we should dismantle it carefully and responsibly before it tears itself apart painfully. This latest deal puts on the path to yet more economic misery, yet more antidemocratic abuse of power and yet more suffering for ordinary people. In its death throes, I fear the EU will harm a lot of people.