Why the EU is a really, really bad idea
This article by Timothy Garton Ash goes into only part of the reason:
Why is Europe in this downward spiral of mutual resentment? Because of the basic design flaws of the euro, certainly. Also because of mistaken economic policies in some of the “peripheral” countries of the Eurozone and, more recently, in the northern core. Meanwhile, each short-term Eurozone fix sows the seeds of another Eurozone crisis. Thus, a 50% haircut for holders of Greek government bonds, agreed to in autumn 2011, helped topple Cypriot banks into the abyss.
Yet the deepest cause is the mismatch between a single currency area and 17 national polities. The economics are continental; the politics are still national. What is more, those politics are democratic. If this is not 1913, it is also not the 1930s. Instead of the “Europe of the dictators,” we have a Europe of democracies. Instead of Trotsky’s “permanent revolution,” we have permanent elections. Some leader somewhere in Europe is always having to trim the jib and pull in the mainsail because of an imminent vote.
All of this is true as far as it goes, but it does not go far enough. It’s not just the design flaws of the Euro, it’s the design flaws of the EU. If elections are a problem in each country, at least those leaders are accountable to someone. How much more problematic is the lack of elections for the EU commissioners:
All these countries, you know, we joined this thing 30 years ago, you joined it 15 years ago – and we all thought we were joining a Europe where we trade together, cooperate together – they were the promises that were made. And now we find we have a European Commission, unelected by the people, unremovable, and they are the government of Europe.
Most of the laws that are made in your country every year come directly from those unelected European commissioners and what’s happening in every country in Europe is the politicians are moving in this direction, wanting more and more power, and the people are saying, ‘What’s going on? What’s happened to our democracy?’ So there is a big gap that is opening up.
Another design flaw is that most of the European welfare states are living beyond their economic means. And the EU (until now, anyway) has encouraged this rather than discouraging it, because of the perception that other EU countries have deep pockets that can be tapped into when the going gets rough.
[NOTE: The end of Ash’s article reads like this, “you can’t blame [the English] for the shemozzle of the Eurozone.”
Say what? I’d never heard that word before—although I’m familiar with “schlemozle” (a born loser) which is close (all these words have a gazillion different alternate spellings). Turns out that “shemozzle” is Yiddish for “a noisy confusion or dispute; uproar.”
Learn something new every day, sometimes from the most unexpected sources.]
The big problem is going to happen when the EU either 1) runs out of Germany’s money or 2) Germany finally decides it’s had enough and says “no more for you”.
The market is now witnessing a preference for German Euros versus Swiss Francs.
No other Euros will do. The expectation is that the rigid exchange rate machine will breakdown. The weaker currencies will lose ground and the German Euro, nee DM, will elevate.
Since Swiss policy currently is to debase the Franc — to favor her export sector — it’s actually now just a proxy for the blended Euros — mostly linked to French Euros.
Folks, Europe has been through this circus many times before. It’s a perpetual French project — son of Mercantilism.
Of course the problem is with the conflicts of interest between the various polities and the central bureaucracies of the EU. This is precisely why the founders decided to use federalism, and even that after the experiences of the Articles of Confederation.
In order to have legitimacy, one must place responsibility. Breaking up responsibility creates tremendous problems with blame and diverging interests. The creators of the EU must have been under the impression that the continent was ideologically homogeneous enough to operate on the same principles and therefore keep the conflicts under control. They were wrong. It is mostly ideologically homogeneous; the ideology is a familiar mutant form of liberal individualism that breeds conflict without, say, an institutionalized church.
Were they really going to expect one polity to willingly sacrifice for another? Without conflict? Stupid. Of ALL places in the world, one would expect Europe to know better.
SGT Caz: please see this.
http://www.longwarjournal.org/archives/2013/03/american_who_fought.php
^^^^
Here’s another man without a country — almost.
No need to drag you through the tedium: he went muslim, joined AQ in the field — of Syria — and then denounced America on Youtube videos — thence to return to Dulles Airport… and the FBI.
Interesting post there. I find it mildly ironic that so many EU countries are relying so heavily on… Germany. It’s either a strange coincidental accident, an excessively long memory, or it says something about German culture and values. Any way you cut it, though, the organization of the EU is an ugly mess.
I continue to be fascinated with the relationship between scale and legitimacy, provincialism and ideology, all that.
Sgt. Caz, visit Germany and then visit Italy or Spain. You will almost instantly recognize what is going on. Or take a tour around the Dolomites in northern Italy. The Dolomites divide into an Italian region, an Austro-Italian region, and an Austrian region. Or tour Switzerland where you have a French region, an Italian region, and a German region. The cultural differences are inmmediately apparent. Not to dis the Italians and French. They are likable people for the most part. They just don’t have the work ethic and obsession with doing things right that the Germans have. In commerce it makes a difference.
What concerns me is the European Commission, an old Politburo with a new name. The ‘undeserving’ peoples will take their turns at being ground to dust. First Greece, now Cyprus, next Slovenia, then….
Don Carlos:
Yep, there are those who call it the EUSSR.
The EU parliament created a Rube Goldberg Euro contraption of chaos. At first the producing countries Germany, Finland, Netherlands, and to a some extent France, where happy to make loans to the Portugal, Italy, Spain, and Greece so people in those countries could buy their products.
They treated the loans like free money and didn’t invest the borrowed money in a productive manner. Spain started a housing boom and squandered billions in ‘green’ energy projects. Others made similar mistakes. Their governments expanded the welfare state and promised public unions lavish pensions. People borrowed money to buy german cars, etc. that they couldn’t afford. Finally they couldn’t keep up with the payments and honor their bonds.
Iceland, Ireland, and Cyprus set bloated financial systems using other people’s money. Their banks made risky choices, Now it is crisis after crisis. Only Iceland decided to bite the bullet and is now in recovery.
The same thing happened with our dot.com bubble, then the housing bubble, and now the new equities bubble. Irresponsible lenders and irresponsible debtors eventually blow up bubbles and just when it looks like it they will grow forever it bursts.
The Krauts are the only ones that work. What could go wrong? The Huns have 16 or 17 60 year children living in their basement. I ask again, what could go possibly wrong?
“I ask again, what could go possibly wrong?”
Murphy’s law holds sway over the actions of mice and men. When people believe in things they don’t understand there is Murphy smiling and shaking his head and smoking a big cigar. 😉
Parker…
You seem invested in re-writing history.
It’s out in the open: Iceland and Ireland involved massive amounts of Control Fraud.
When the books are audited — and made public — control fraud will be revealed in Cyprus.
The players there went through far more money than common — even uncommon — bad loans.
They not only tapped out ALL of the bank’s equity — they then proceeded to tap out the better part of the depositor’s money, as well.
The figures are still in flux, but it’s at least apparent that they blew through TEN times the capital of the afflicted banks!
That may be a new world record.
Under no circumstances will the brutal facts come out in a timely manner. As a public reader, one must infer — based upon prior crimes — the depth of the chasm.
Right now, Cyprus reads like Country Wide — if not the worst of the worst S&L debacles years ago. It took years for the frauds of Charles Keating to reach a verdict. Even those felonious verdicts were set aside upon appeal: the paper mill ginned up by a first class thief befuddles the minds of the common man.
My Uncle, DA, retired, long told me that such cases are brutal on the juries: just too much fact, too much detail, …
If you’re waiting for the press to point the finger and spell it out: this is the same crowd that shunned all arithmetic in grammar school, all math in high school, and all accounting matters at any age. (Hence, their politics of words and quotes.)
A pile of deposits draws rogues like offal draws flies. It’s a law of nature.
I’m reminded of that old joke:
Heaven is where the police are English, the chefs French, the mechanics German, the lovers Italian, and it is all organized by the Swiss. Hell is where the police are German, the chefs English, the mechanics French, the lovers Swiss, and it is all organized by the Italians.
On a more serious note, a common currency can’t overcome ingrained cultural characteristics and entrenched political practices. When you add reckless business decisions and outright fraud to the mix, you have, well, exactly what we’re seeing now. This won’t end well.
French Euros vs Swiss Euros?
Will someone explain?
http://www.zerohedge.com/news/2013-03-30/political-fallout-begins-former-cyprus-president-named-loan-write-offs-leading-banki
For Parker. ^^^^
It’s only been a handful of days and the fraudulent ‘loans’ are popping up.
These banks had been run as long cons for quite some time.
Hence, the need to buy off the legislature and the executive.
I’m sure this is but the tip of the iceberg.
Berlin/ ECB has shut down the game.
Upon reflection, Putin woke up an realized that Moscow was as big a loser from these laundry machines as any other party — probably more so.
Ed B.
The Swiss issue a fiat currency: the Swiss Franc.
However, as mega-money, nay giga-money, flew into the Swiss Franc from the Euro Zone, her export engine sputtered… to a halt.
To revive her most important trading houses, officialdom changed policy 100%. Switzerland began massive money creation and intervened in the currency swap market to hold the Swiss Franc in lockstep with the Euro Zone. Translation: it stopped appreciating into orbit.
With such a policy in place, the advantage to holding Swiss fiat faded. (Ducking taxation still worked — note the wealth taxation during the Cypriot crisis.)
Not withstanding the lies, the Euro Zone does not have one, unified, currency. It’s not set up like the US Dollar — not by a long shot.
By the treaty, there are absolutely no cross-sovereign guarantees within the Euro Zone. Berlin in no way guarantees the Greek Euros printed and issued by Athens — nor the bank deposits therein — which are also in Greek Euros.
The ONLY nation backstopping Greek Euros is Greece.
That’s the reason there is a crisis at all. If Greek Euros were really identical to German Euros then Athens could just print up a boodle and ship them north.
Plainly such banknotes are NOT acceptable to Berlin — nor anyone else inside the Euro Zone.
Wake Up!
The EZ is nothing more than a polished up rigid exchange rate regime. It’s a favorite of Mercantilist ideology. Under Mercantilism, a nation wins by piling up all of the magic metal/ trading chits in its central bank — thence available to the sovereign. (As in war fighting power, circa Louis XIV.)
The only difference this time around is that the intermediating metals (silver or gold) are bypassed.
And, the new generation of fiat banknotes were rigged to trade exactly at 1:1 in the foreign exchange market when each new player entered the Euro Zone.
[This was done by using the US Dollar as the benchmark — that is — the new fiats started out trading 1:1 against the US Dollar, too. They, collectively, now trade at 1.3 USD vs 1.0 Euro.
To hold the rigid exchange rate in line Berlin/ ECB has had to refresh the trading accounts of the weaker powers via devious mechanisms that fool/ befuddle the MSM.
Upon reflection, you must realize that every hedge fund/ speculator on the planet is lining up for the end of this fixed exchange rate scheme. When it blows up, it will be Cyprus on crank.
BTW, read carefully: there is no such thing as a ‘Swiss Euro’ — the Swiss Franc merely trades in lockstep with the Euro because of massive central bank intervention.
That is all.
blert: thank you very much for taking the time to explain that to me so well. I had no idea. obviously.
}}} I’m familiar with “schlemozle” (a born loser) which is close (all these words have a gazillion different alternate spellings).
Actually, Jews make distinctions between two different types of losers. The “schlemiel” and the “schlemozzle”.
The first is the guy who constantly goes around spilling his soup, due to lack of coordination, awareness of place and surroundings, and general loserly, klutzy qualities all around.
The latter is the guy whose lap he spills the soup into. He’s just an unlucky schmo who didn’t do anything wrong but be in exactly the wrong place at exactly the wrong time (yes, that can sometimes be “sense”, too, but if you don’t have that sense you’re a schlemiel, too, not a schlemozzle).
blert,
A bit late revisiting this thread…. I realize massive bank fraud was committed in Ireland and Greece. Massive bank fraud is happening here. Fraud and corruption have become institutionalized. How else does Corzine walk away without explaining how 1.6 billion ‘vanished’? Those with connections to the Cypriot have probably siphoned off billions during the banking holiday.
Smock Puppet: actually, that’s not quite the way it goes. The schlemiel is the clumsy oaf who spills the soup on the schlemozle (the born loser), and the nebbish (the poor unfortunate) cleans it up.
LOL:
http://www.youtube.com/watch?v=aLsukIsrcMI
😀
All those Euros voted their dumb invigorating rights away in their democracy. How foolish.
Then again, the US is merely behind in scale, not kind.
The original creators of the EU knew exactly what they were doing and they have succeeded.