Friday's meeting of the European Union might very well go down in history because by a 26-1 vote, there was a joint commitment to impose fiscal discipline on any government that pursues an overly lax policy of deficit spending. All EU countries have agreed to submit their national budgets for prior review to the EU. In addition, the 26 countries will have standardized laws for corporations and a speculation tax on investments. It's not the United States of Europe, but it is substantially stronger than anything before.
To be sure, there are plenty of things still wrong with this picture. Why is it that there is a pledge not to impose any more haircuts on the big banks holding Greek, Italian, Spanish, etc. debt -- but no committment to back up the national bonds of these countries? Germany is still in the position of deliberately hobbling the European Central Bank to feather its own nest at the expense of almost everyone else. And there was only a small committment to somehow increase reserves for to fight possible fires if contagion breaks out down the road. From a social justice standpoint, it's absolutely galling that an austerity program has to be imposed on an entire continent so that bankers can continue to receive a steady rate of return. And austerity has never been a recipe for prosperity in times like these.
Given all of that, I make an analogy of the current situation to a mean little kid playing with one of his toys. In the process, he sees how much it will take to break the damn thing. I used to have the nickname Destructo when I was a certain age, so I know. How far can I throw it? How much force can I run it into a wall? Will dropping it out of a window on the second floor help to break it? Over and over, the euro has faced imminent crises where its very existence is supposedly on the line. And over and over again, the EU meets with some vague proposals -- and the euro is "saved" until next time.
The fact that there hasn't been a collapse of the euro yet is a tribute to the strength of the idea of a unified Europe. One small indicator of this are man on the street interviews in Greece. While the Greeks unanimously condemn their government and the EU for imposing austerity measures, I have yet to hear one person being interviewed saying that it would be a good idea to drop out of the eurozone to go back to drachmas.
And there's a very important thing that you should know. Much of the talk being generated about the destruction of the euro is being done by the very speculators who'd like to make a ton of money on their badmouthing. This is the extremely evil 1%. And the good news is, despite all the attempts to panic the herd many times, it still hasn't happened.
I strongly urge you to go to the BBC News website and pull up an interactive graphic headlined, "UK alone as EU agrees fiscal deal." In it are seven different scenarios for what the final outcome of the eurocrisis will be. You can look at each dot with its paragraph, and you can assign your own percentage numbers as to how probable or improbable each scenario is. This is my assessment:
30% - MUDDLING THROUGH TO UNION. Given Friday's vote on the EU, this scenario looks most likely to me. Believe Angela Merkel when she says that the process will take years. But I believe that a stronger EU will eventually happen. It won't be the United States of Europe, but the final structure might be half of what the USA became after the Continental Congress debacle.
20% - INFLATION. This would mean that Germany would have to change its mind about the European Central Bank acting as a backstop on all continental debt and currency. Yes, inflation would result if the ECB opened up spigots and just printed money. But that's exactly what is needed when you're in the middle of a depression. By the way, this is essentially what Alexander Hamilton did as the first Secretary of the Treasury. We're still waiting for him to reappear in Brussels and Berlin.
10% - GERMAN AND FRENCH PLANS FOR EU GET IMPLEMENTED SMOOTHLY ACCORDING TO THEIR PLANS. This is a happy talk scenario, as it assumes that investor and market confidence will somehow magically spring up just because of unification efforts. I'm temporarily optimistic, but I'm not that optimistic. And these other scenarios tell you why:
20% - DIVORCE. Given that 26 individual countries have to vote on imposing fiscal discipline, there's still a chance that one population or another might object enough to the "We got sold out. Banks got bailed out." mantra that there would be a popular vote to block a proposal like this. Ireland or Italy are just two of several countries where this could happen. And if this happened, even worse scenarios could grab hold.
10% UNRAVELING AND MELTDOWN. (combined). Once a divorce got started, it might very well be impossible to stop these scenarios from coming true. Under a divorce, there could be a controlled break-up of the EU. Great Britain has already put itself in that position, but then Great Britain has the economic power to stand apart from the continent for a long period of time. Unfortunately, no other country in the EU does.
10% DEPRESSION. An EU meltdown would certainly bring on a depression. But there are other things in the world that could do the same thing. Total gridlock in Washington, DC between now and the election will help in its small way. But the big wild card in this scenario is China where things are not looking so good. Between the three, it's almost certain that 2012 will be a bummer of a year economically. The only question at this time is, how much of a bummer is the world getting into?
As you can see, my take is that there's a 60% chance of being optimistic about the EU for the time being, and only a 40% chance of being negative -- at least from my perspective. When you couple this with some of the positive fundamentals of the US economy right now, things actually look like they could go up a little bit in the short run before bad things start to happen again.
And we all know that bad things will always happen in 2012.
TIP:
Enter the amount, and click "Tip" to submit!
LEV JANASHVILI
Omnipotent Poobah
Donegal Descendant
Emily Holleman
MarianneSp
Reverend Billy Talen
Salon.com
Comments
http://www.counterpunch.org/2011/12/09/europe%E2%80%99s-deadly-transition-from-social-democracy-to-oligarchy/
Better controls of the banks by representative governments would seem to be the best we can hope for.
As the optimist who fell off the tall building said as he passed the 12th floor, “So far, so good!”
The measures being taken (especially that austerity crap) all seem to be the wrong medicine, ONL. I suspect Europe is not only going to fall…it is going to fall BIG TIME. America is probably going to crash shortly thereafter. Hate to be a pessimist, but I see a depression that will make the last one seem like good times.
We (both the Europeans and we Americans) are not conceiving of the problem properly. NO solution will be forthcoming until we finally see the problem for what it is.
Congratulations to Jan for giving us that addy.
Go there.
Read it.
Re-read it.
Now you understand much that was puzzling, don't you?!
.
Go have a look at the article recommended by Jan (first comment of this thread). It's a tad long but you won't mind. It's clear and understandable without a degree in macro-economics. It's the best I've ever seen on the subject.
.
NEWSFLASH! England is so damn f%&king glad NOT be part of the Eurozone!!!!!!!!!!!!!!!!!!!!!
I am sure the rules for the 'new collectivism' of approving each others budgets will work. . . . . Won't they? Nothing like having to crawl in bed with your neighbor and insure that all his parts are in the right place. Such is the great virtue of socialism -- an equal sharing of misery.
As usual, the evils of "socialism" are held up to frighten conditioned Americans away from any sincere attempt to try to manage the resources of civilization for decent lives for all of humanity instead of the outrageous luxuries of the minuscule crowd of controllers of most of the world's bounty. The bastards are killing the world and it's about time the general population came to realize who the enemy really is.
Secondly, everyone in Europe remembers how wonderful more than 500 years of constant warfare was. The idea of the European Union was to eliminate the power politics that killed so many people. In that respect, the EU's worked quite well.
From both a political and economic standpoint, the EU is a good idea. And for the horrors of socialism? Yes, remember the horrors of six weeks' paid vacation, a year off to raise your child, and the 35 hour work week.
but I just keep on reading
That statement couldn’t be any more false. Germany has no good options remaining and they have to decide on the option which will hurt their economy the least. The two options are:
1) Write a big check and prevent the Euro from failing. Keep in mind, there is very little evidence to date that they will get paid back. The PIGS continue to spend wildly more than they tax and if nothing changes, Germany will find itself in the same position they are in now albeit with more of their hard earned money wasted.
2) Allow it to fail. The pain would be immense but at the end of the day Germany would be able to sever itself from the Euro and never have to bail out another country again. I think they’ll choose option #2.
The biggest money is of course in manufacturing arms, which the big companies sell to national governments.
Now India has decided to give a big deal of new fighters to European companies, not to Americans not to Russians. Boeing is fighting against Airbus consortium about 'unfair' financial support Airbus is getting from EU.
The other big money in the world and in Europe, too is in energy businesses, nuclear power, oil and rising renewables.
Middle East countries have been planning to do oil business in euro currency instead of us dollar; that kind of move would probably mean collapsing dollar. Global warming believers are playing in the hands of nuclear industries, which suffered badly from the recent accident in Japan.
I think that Americans will be the losers, Europeans, too in the longer run. The winners will be India, China and Russia.
Your understanding is what the PIGS would like you to believe. But if that were true, why don’t the PIGS do the same and export their way into economic solidity? I’ll answer that, because they aren’t competitive. Other countries eat their lunch (Germany and China to name two), making them dependent on imports. So in the great game of global competitiveness, the PIGS lose and they want the Germans to write them a big check to compensate them for their failures. Germany would be stupid to reward failure. The dilemma faced by the Germans is the same dilemma facing the voters of this country in 2012.
What is not being said in the latest EU accord is that Greece is going to be put on permanent life support. Every month, another $9B will be doled out to make Greek debt payments -- mostly to French banks. And the EU is basically just keeping its fingers crossed that Italy, Portugal, Spain, and others will transition themselves through this rough patch as market confidence is restored.
As I've said elsewhere, until such time as the European Central Bank can act as the lender of last resort -- becoming more like the Bank of England or the Federal Reserve Board, the underlying problems of the euro will remain. The most successful ultimate resolution to the problems facing the EU (besides some remarkable re-establishment of confidence in all European debt) is for Germany to bite the bullet and allow for mechanisms for the European Central Bank to become a true central bank with American or British power. And by the way, this is what every one of the 25 other countries in the EU vote want to see happen.
Time will tell whether the Germans give in and allow it to happen, or whether the EU has merely set itself up for a greater catastrophe down the road.
The Germans are not punishing the PIGS, Germany’s sound economic condition is in jeopardy because of the PIGS. If the PIGS want to better their situation they need to control their spending. The Germans are the ones that would be letting the bankers off the hook by bailing out the mess the PIGS created. Remember with that German check, the PIGS pay off their bankers, and in return the Germans essentially become their new financial lord. So when you say “screw the poor and reward the rich” what are you really saying? Who are the poor, the bankers?
Don’t be confused by Lefty’s twisted economic reasoning. He must think money grows on trees and there are no financial ramifications for overspending. That doesn’t surprise me; nobody on the left seems to give a shit about the amount of debt Obama continues to rack up. That bill is coming due as well.
Really, this is autocracy of the bankers. You're an idiot. This is a disaster.
Arms busines and energy businesses are the biggest businesses of the world at present.
The whole European Union was born of agreements of weapon manufacturers' agreements with national governments...
OCCUPY WALL STREET