“We have come a long way in Europe, learning lessons from the crisis. But recent developments demonstrate that we must look further to complete the architecture of our economic and monetary union.”
~ European Commission President Jose Manuel Barroso
Watching what is happening in Europe right now is very concerning. Let me say from the outset that I am not in favor of a continuation of the European fiscal union. The Euro project has been a failure. When you see what’s happening from the outside – it certainly appears that there is a concerted “shock and awe” effect being utilized on various European citizens to make them pliable to the idea of a more concentrated fiscal integration in Europe … in short – people are being manipulated to support a United States of Europe.
If Europeans vote for a tighter integration of European policies – they are voting for less freedoms and less democracy. They’ll be voting for having less influence on what happens within their countries. And perhaps most importantly – they’ll be voting to see themselves as Europeans first and members of their country 2nd. Their votes for President and legislature will simply matter less; they will be bound to new treaties and the Constitutions of those countries will no longer mean anything.
This is being done for a number of reasons…
#1 – Europe and Western countries like America would rather not see the satellite states in East Europe drift back towards Russia. For a time – Russia already supplies the majority of natural gas to Europe and is in a position to dramatically damage Europe if it decides to stop exporting that and other resources. As an economy – Europe is 1/3 of the world’s economy. This yields real soft and hard power.
#2 – This is something that international bankers really want to see happen. By implementing full scale integration of Europe means less risk for banks on their loans. It would be a dramatic loss to the bonuses and stock options of many CEO’s and hedge fund managers if any of the countries in Europe followed the path of bankruptcy like Argentina and Iceland. Needless to say – what Argentina and Iceland did was in the best interests of the people of those countries … but large, wealthy western banking interests were 100% against those countries defaulting on their debts. And yet – here they are … recovering nicely.
#3 – There really is a bigger picture play here. I suspect this has been the game plan for a long time.
Reuters reports that many within the EU are trying to push for an integration of European countries HERE:
As one EU official put it, the immediate action is focused on how to put together a banking union, including deposit guarantees and a regional fund for winding up bad banks with operations in several countries.
The longer-term vision is about fuller fiscal integration.
“The fiscal union is something that necessarily requires a degree of political discussion and democratic legitimacy,” the official said, indicating that complex changes to EU law would be needed. “It cannot be done from morning to night.”
Banking union, on the other hand, is something leaders hope can be brought to fruition more quickly and should be possible under existing EU treaties, although Germany is cautious on that point and about too much pooling of bank liability in general.
But the single largest problems that these countries are experiencing in Europe comes from an inability to control their own monetary policy. Without being able to control their own currency … countries are left at the whims of the European Central Bank which has thus far only shown a willingness to punish those whom are not properly enthusiastic about doing what it wants. If countries controlled their own currency … they would be able to handle this economic crisis much better.
Matt Yglesias says the European Central Bank is trying to use it’s leverage to force countries to do what it wants HERE:
And the deeper the crisis has gotten, the more the European Central Bank has gotten itself involved with this question. Instead of pursuing a single mandate of price stability or a dual mandate of prices and employment, it’s implementing a two-target strategy that involves price controls and specific political outcomes. Basically countries that implement structural policies that ECB staffers favor are rewarded with less-inappropriate monetary conditions, and countries that challenge the ECB consensus are punished.
This is contrary to democratic values, plainly incompatible with sound monetary practice, and a terrible way to encourage sound structural reforms to boot.
And now – even with the Greece elections appearing to have a pro-bailout, pro-austerity administration forming … other countries are imploding. The Washington Post has the story on Spain’s impossible scenario HERE. This chart tells a painful story of Spain’s banking problems, economic double-dip, and unemployment nightmare all in one; this is what a depression looks like but let’s just integrate European countries more closely and it will all work itself out </sarcasm>:
America is one of several countries pushing Germany to support a “rescue fund” or further financial integration within Europe making the debt of Spanish on par with the debt of the Germans and vice-versa. They are using this crisis to push for further fiscal integration. Article HERE:
There was speculation that the full total required could end up being far more than €100bn. Madrid was forced to pay a record 5.07% at a debt auction on Tuesday morning to borrow €2.4bn for just 12 months, prompting analysts to say Spain is edging perilously close to needing a full-blown rescue.
“The decidedly elevated bond yield levels leave a question mark firmly in place as regards the sustainability of Spain’s public finances while doing nothing to temper speculation as to how long the country might hold out before looking for a more comprehensive bailout,” said Richard McGuire of Rabobank.
British government sources were stressing that any steps taken to help on Spanish bond yields were not a substitute for longer-term reforms such as European banking union, fiscal integration and even political union.
The chancellor, George Osborne, hinted at the possible deal saying the eurozone was inching towards solutions. He said: “I think there are signs that the eurozone are moving towards richer countries standing behind their banks and standing behind the weaker countries.
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