If the EU cannot put together a deal that makes sense to themselves, why would anyone else bother?
Nothing was agreed at Cannes, because Europe says she has run out of money, and China et al have no interest in bailing her out if the eurozone members themselves don’t want to. If the EU cannot put together a deal that makes sense to themselves, why would anyone else bother?
So, everyone is turning to the IMF, but it hasn’t got enough cash either, so says it is planning to raise some $3.0 trillion, at which point the IMF will have the problem instead, until it realises that, as things stand, there is no way forward. Meanwhile the euro-crisis is now as much political as economic.
Last Monday I wrote that the EU Summit farce had reached a point where the leaders had lost control and that “Events, dear boy, events!” would now begin to set the agenda, and we only had to wait until Tuesday for Greece to throw the first custard-pie: from the land that invented democracy, a newly-baked referendum on ‘In or Out of the EU?’ came hurtling out of the Greek camp at dawn and caught everyone by surprise, as it effectively unstitched the EU-Summit Accord of just three days earlier.
So on Thursday the G20-Summit, effectively the third EU-Summit in ten days, opened in Cannes amidst recriminations, with the democratic deficit at the heart of the EU cruelly exposed, as Merkel and Sarkozy told old Papahandout that ‘This is the EU, and we don’t do listening to the people – we the elitists take the decisions around here and no one else!’
Meanwhile, the contagion has moved decisively towards Italy, the land of the bunga-bunga paid for on too much borrowed wonga-wonga, with total debt at €1.9 trillion and a debt-to-GDP ratio of 120%, as its bond yields rose to an unsustainable 6.4%.
As I have said before, it is not the debts which are the real crisis, but the euro itself, or rather the idea of monetary union. If it was just debts, the IMF’s proven mantra of devaluation and austerity combined would deal with them over time, no problem. But with the single currency, devaluation cannot take place, unless the indebted country leaves the club in a trail of unpaid debts and bills, and losses for the banks left in the club, mainly French.
It is extraordinary to see the IMF, under the former French Finance Minister Mme Christine Lagarde, seemingly in denial of its own standard viable formula, but instead trying to position itself alongside the non-devaluation euro-zone, which flawed concept is at the heart of the EU’s economic catastrophe.
What is most odd is that a clear majority of the Greeks want to stay in the EU, despite its asymmetric economies and daft economics. For these Greeks, it is a cultural issue, of being European, as opposed to being Euro-Asian, or God forbid, Turkish/Asian, what with their distant memories of all those battles on the windy plains of Troy.
This would not be an odd stance at all if the EU had stuck to developing what it originally told the people it was going to do, namely create a common market of sovereign nation states with their own sovereign currencies, ‘Une Europe des Patries!' as General de Gaulle was at pains to emphasise.
So, what went wrong? It was the dream of the unelected bureaucrats in Brussels who met up with the new political Franco-German elite of the 1970s who both thought they knew best: remember Valerie Giscard d’Estaing and Brandt/Schmidt and the Snake? At that time, pre-unification West Germany let the French drive the federalist agenda towards a super-state, a very different agenda to the one they had a mandate for, with a democratic deficit and an unworkable monetary union at its centre. From such arrogant dreamers’ covert designs, the EU evolved into a Fawlty Towers flat-earth edifice, which now faces its moment of hubris and probable nemesis, as currently structured.
The eurozone’s eventual and inevitable collapse will herald difficult times and be the cause of unforeseen losses, risks and dangers, but that is no reason to persist with the folly that created this situation, which can only get worse the more it is propped up and bailed out.
Radical action is required, but statesmen are nowhere to be seen these days, as the current mob run around like headless chickens, propping up this euro-facade, a real trompe l’oeil of unworkable economics if ever there was one. It’s boomerang time, with the boomerang being passed, unthrown, from the EU to the IMF… until it comes back again.