The eurozone has descended into a bunfight, and none of the politicians apart from one can see the wood from the trees
The eurozone has descended into a bunfight, and none of the politicians apart from one can see the wood from the trees. As the Greek crisis is suspended until the elections on 17 June, the potentially much bigger Spanish banking crisis has taken over the running, with possible domino effects in store for the wider eurozone and many of its other banks.
For the Spanish PM, and the other PIGS, now improbably joined by France, the US and the UK, with its haphazard Cameron bogged down with pasty-taxes and other assorted ills of his own making, the answer appears simple: roll over the EU and save the banks, which means in euro-speak that Germany must underwrite the banks and the sovereign debts incurred by earlier failed bailouts. One voice of reason, however, prevails.
‘It is not up to our taxpayers to bail out busted banks!’ replies Merkel sternly, and wisely.
Merkel is completely right, and in accordance with every lesson that history has to teach. Governments that bail out busted banks are economically illiterate, not to say mad, and deserve to step into the even bigger morass of their own making. (Governments should only ever bail out depositors – something else missing in the EU.)
The Spanish banks are bust because they have invested far too much in bankrupt property assets, and have lost between 50 and 100 per cent of their loans – but they haven’t written these bad debts off as their balance sheets would be hopelessly bust if they did. Now their deposits are disappearing fast too. So, they reason, give us the money to cover these losses, from another country’s taxpayers, as though the latter’s interests are irrelevant!
When Obama, Cameron et al urge Merkel to bail out such a situation they are barking: why on earth would or should German taxpayers pour money into bottomless Spanish black holes for their certain immediate and great loss? Merkel’s response is that the Fiskalpakt must be in place first, along with political union, but even if the people of Europe wanted such a defeatist long-term ‘solution’, it could never begin to be enacted in any time to deal with the rapidly unravelling banking/sovereign debt crisis that is about to engulf us all.
The eurozone, and possibly the EU itself, is structurally doomed. Any efforts to prop it up with false economics will simply delay the inevitable crisis and cause bigger losses down the road. That is the economic reality. So who is to blame for this monumental fiasco? Firstly, the previous generation of euro-political elites who defied democracy and shoved the Maastricht Treaty, without listening, down the throats of the people; and secondly, the current politicians who have failed to recognise reality and deal with it for the last three years, and who are now about to be overwhelmed and swept ignominiously from power. Apart, I suspect, from Merkel and her good Swabian housewife instincts, albeit based as they are on Dickens’s Micawberite self-regulatory injunction.
What a great opportunity was lost by Cameron, when he refused to ratify the Fiskalpakt, and could have gone on to reject the whole rancid debate in Europe and plot a constructive path to a realistic future confederate solution! He had the momentum, he had the Great British electorate on side, and he had got ahead of the debate, and then he blew it.
Now he has unwittingly lit the fire under the UKIP revival on his own doorstep, has sided with the siren calls of Obama who doesn’t do economics and only has an eye to his own re-election, then furtively backed the loser Sarkozy against the winner Hollande, who at least had an idea for growth, but no idea of how to implement it.
After a weekend in Britain that saw unprecedented support for our monarch and everything she stands for – a constitutional monarchy of an independent union with its own currency and tax system, and an independent central bank and regional transfer system, in fact all the essentials missing in the EU – Cameron should reflect earnestly and honestly on what sort of country he is meant to be the leader of, and stop wasting his own time and our patience by playing Coalition euro-politics going nowhere.
Otherwise, we will all join UKIP because of his ongoing default, a continuing Conservative failure ever since Heseltine, Howe and Hurd, that devious bunch of blinkered euro-dreaming matricides, stabbed Thatcher in the back because they knew she wouldn’t sign that utterly daft constructivist folly called the Maastricht Treaty, the source of all our current euro-woes.