Sunday, October 30, 2011


A few citations from British newspapers of both the Left and the Right:-

Sunday Telegraph: Liam Halligan, who works in the bonds business. My emphases.

Last week's eurozone "agreement" . . .. Far from making the situation clearer, allowing investors to make considered assessments, this latest announcement made Western Europe's grotesque debt crisis even more acute, sowing further infectious spores of confusion.

Some say Western governments shouldn't "accept" what the market says. "Who do these trading people think they are," I hear from the lips of the educated but financially-illiterate political elite. Let's be clear – if global bond markets stop lending to a number of large Western economies, we are in the realms of unpaid state wages and pensions, transport chaos and closures of schools and hospitals – sparking the prospect of serious civil unrest. Forgive my intemperate tone, but these are the dangers we face. And I'm afraid the only rational response to Thursday's announcement is that the probability of such undesirable outcomes has just been increased.

What is needed, urgently, is a clean, transparent Greek default – allowing this flailing semi-developed economy to leave the eurozone, re-establish a weaker drachma and regain its self-respect. Portugal should leave too, its membership of the same currency bloc as Germany is as absurd, and self-defeating, as that of Greece. There would be further market turmoil, yes, but a few more months of volatility, leading to an ultimately more stable outcome, is surely better than the current situation where the entire world is living in fear of a massive "euroquake".

The eurocrats, of course, lack the guts to trim back monetary union to a more manageable size. Too much face would be lost. So "euroquake" fears, once viewed as outlandish, are gaining pace.

The eurozone must be consolidated. World leaders should similarly force European banks to disclose their losses, we all take the hit and then we move on. Instead, we are served-up, in ever more complex variants, the same "extend and pretend" non-solutions. It gives me no pleasure to write this, but I give this deal two weeks.

No amount of "pro-Europe" platitudinising will find jobs for millions of unemployed workers who are the euro's victims round the Mediterranean basin. No amount of patronising analysis will turn Italian farmers or Spanish fishermen into German technicians. The differences between states must be reflected in their terms of exchange. This is not a matter of being "pro- or anti-Europe". It is why the eurozone must find a way to a "managed shrink".

The dream of a fused Europe, like that of one America, was noble after the horrors of the 20th century. But it was unrealisable as envisaged. It instead morphed into a sanctimonious, mono-cultural elitism, dominated by the bankers and bureaucrats that have brought it to the present pass. At first the EU was just a mildly corrupt way of shuffling taxpayers' money round the continent. Under monetary union after 1999 it went both reckless and rigid. It has snapped, yet its apologists have nothing better to offer than bromides about budgetary discipline and fiscal union.

Sunday Telegraph: Janet Daley. On what it means for democracy in Europe. Death, essentially.

Citations are pointless here. If you think, as I do, that giving power to (new) unelected bureaucrats to determine national budgets is yet another hammer blow to democracy in the eurozone, then it's a must-read.

I used to cross swords with Moscow on this issue (and others) but he doesn't seem to be reading this blog since I told him he could write any comment he liked but I wouldn't be answering them, whatever the temptation. That said, it'd be good to hear him on these issues. And I might even break my word.

The Guardian on Sunday. Simon Jenkins, as brilliant as ever. Putting into immaculate prose what I've been saying for years. And others, of course.

The day of reckoning has come, but not yet gone.

Champions of the euro breathing sighs of relief deserve no sympathy. Since its launch in 1999 they knew this would happen. They knew the preconditions for a single currency – economic convergence and an enforceable "stability and growth pact" – were not in place. They knew that putting Europe back on a sort of gold standard would not bind national economies together into a single homogeneous powerhouse.

As the uncompetitive members lurched into debt, they tut-tutted about sinfulness but did nothing. Instead the eurocrats waffled on about a solution lying with closer fiscal and political union, a sort of Holy Roman Empire reborn. They knew this was rubbish. Yet I have not detected an ounce of shame for the misery this policy has inflicted on the Greeks, and will soon inflict on the Italians and the Spanish. Youth unemployment is now 46% in Spain, fighting an estimated 30% overvaluation of Spanish output against Germany. The single currency is mad, and politically dangerous.

There is no way a drastic increase in the central control of the European economy will gain support from national electorates. Nor will they accept that the European parliament offers sufficient accountability. People will not be further divorced from those who run their lives and fix their taxes. Were Germany and France to impose a single socioeconomic regime on all Europe as the price for a single currency, most governments that co-operated would be voted out of office. That is why Germany's demands will not be met. The politics will not sustain them.

As long as there is no united European state, there can be no united European currency. The euro may suit converged economies, like Germany's immediate neighbours, but it cannot be a tool of political suzerainty by Brussels over 17 diverse nations. Whatever the question, the euro is not the answer.

The marginal states of the European Union must, like Britain, revert to floating exchange rates, to take the strain of different lifestyles and working practices.

Comments are very welcome, whether you agree with the above or disagree. But please avoid making ad hominem points, however accurate they might be.

PS: Two of the above writers support the concept of a EU confederated state. Though obviously not in its current form. Which lacks a real Constitution and democratic legitimacy. Inter alia.

PPS: Since I first posted this half an hour or so ago, I've come upon a columnist (Will Hutton in The Observer) who supports the euro, dismisses arguments such as those above, sees the euro surviving and regards the developments of last week as "an inspiring leap."

And who knows?, he might just be right - if reports this morning of a massive new investment vehicle exclusively for China (arising, Phoenix-like, from the ashes) prove accurate. And the fund is actually created.

Vamos a ver.

1 comment: said...

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