Nigel Farage, Leader UK Independence Party, may prove to be one of the new politicians who get to clear the mess up
The result of fevered EuroZone debate looks like yet another very shaky plan designed to buy more time in the hope that an economic miracle will sweep the problems away.
The message that most clearly came from the meeting of Heads of Governments was that whilst Germany wanted European domination, there was more disagreement than agreement.
Building a new bail out fund that is short of the amount required to fully firewall the damaged economies of Greece, Portugal, Ireland, Spain, Italy and France may do little more than keep the markets guessing as they start to work through the detail and find the points where the plan does not hang together.
The only real agreement between the 17 member Euro Zone is that they hope someone else will bail them out so that the Federal Super State project can grind on against the wishes of the peoples of Europe.
In the latest twist, vertically challenged French President Sarkozy plans to go cap in hand to China to beg for the money really required to prevent Euro implosion.
China is naturally cautious. Helping Europe stay afloat, on the one hand, makes great sense because its China’s largest market and its failure will drag down the US which is China’s next largest market. If that was the result, China would suddenly face huge internal problems as its economy stops growing and then turns to contraction. However, China is cautious about pouring money into an economic zone when the politicians are so far removed from the people of Europe and where the promises of European leaders may prove worthless as they struggle to pacify an increasingly angry electorate. There is a reasonable fear that European leaders would simply fritter the money away, leaving the real problems unaddressed, with the result that a global depression had only been delayed and would become even deeper, creating ever more difficult conditions in China. At least one faction in China believes in hanging on to their money and spending it internally to maintain popular support when the Greatest Depression arrives. Any remaining Chinese funds could then be sent buying bankrupt national stock from western countries.
The really sad factor is that the Euro Zone could have started take action six years ago when the situation was still fully within its own economic resources. The result of years of delay has been to create a problem that may not now be capable of a solution without significant pain spreading around the world. The ambitions of a remote political elite have brought Europe to the brink of bankruptcy where even Germany no longer has the economic resources to solve the immediate problems of the Euro Zone. Europe now depends heavily on help from outside and the hope that threats of economic implosion and war will frighten others to rush to help.
There are two basic Euro Zone problems that are political rather than economic.
The first problem is that the rules under which members joined the zone have not been enforced. Pouring money in to solve sovereign debt issues will do nothing to force Euro Zone members to follow the rules and begin to tighten them. There is a strong argument that no more money should go in from the IMF and other external sources until every member of the Euro Zone signs up to follow their own rules, introduce strong accountability and a mechanism of enforcement that cannot be side stepped when it suites individual members or the political needs of some leaders facing elections. The current argument seems to be to march rapidly to a full federal Europe directed from Berlin, but that ignores the part played by the leaders of all the Euro Zone members in encouraging a corrupt and unaccountable federal state ruled by unelected Eurocrats.
The markets are rightly showing skepticism, having seen a succession of wordy leaders’ meetings that produce laudable statements that conceal a serious lack of detail and resolve.
This highlights the second serious Euro Zone problem, a fundamental lack of leadership. Even if Germany and Merkel were placed in the driving seat, the German electorate may consider that it is not in their interests to prop up failed politicians with their tax moneys. The one solid fact is that most of the politicians who presided over the Euro mess will not be in office more than two more years and become increasingly influenced by short term electoral issues in their home countries.
It has become increasingly difficult to believe in anything said by Euro Zone leaders, when each new leaders’ meeting is presented as the Last Opportunity for Solution, only to end in a whimper as real agreement proves elusive and the vague plans announced are claimed to be more detailed than they are, with the final detail to be announced at the next meeting. When the next meeting arrives, trailed again as the Last Opportunity, any modest agreement from the previous meeting has vapourized and a new attempt is made to con the markets. In this latest meeting, the most damaging factor is that it was originally intended to be completed three days earlier when the leaders were supposed to endorse a highly detailed plan allegedly prepared and agreed by their individual finance departments. It then emerged that “there were a few minor issues to be agreed”, before the leaders would sign the agreement yesterday. Now the claim is that details will be announced at the G20 meeting, but the markets may not wish to hold their breath.
It may now be too late to prevent a global melt-down and the main question may be when rather than if.
There is one growing body of opinion that believes the best solution may be to stop digging the hole any deeper, suffer the immediate consequences, rebuild the structures of the global economy and start again, probably with new political leaders.
Commentators point to the experience of Greece where a mountainous debt has grow ever larger as more, inadequate, bail-outs are paid to Greece. The result is that Greece has moved from orderly default to partial default, as the problem grows and the eventual collapse will be very painful. Had Greece left the Euro, when the markets began to identify the scale of Greek debt, there would have been a major devaluation of a new currency but, with IMF help and clear plans for recovery, the initial pain would fade and Greece would develop a sound sustainable economy geared to its fiscal realities, rather than to German design developed for a very different economy.
Those now favouring this approach point out that the people most in favour of delaying the inevitable are politicians who want to cling to office rather than address the urgent problems. The claim is that these are the people who created the mess and the least likely to solve the problems. Once they are gone an economies begin to adjust to reality, the climb back out of the economic pit will be very much faster than vested interests are trying to convince voters.