The slow speed train wreck that is the European Common Currency, Euro, seems to be picking up speed to the final impact, with the EU desperately trying to apply the brakes.
The Euro crisis has been developing for more than six years but the Eurocrats had been successful in papering over the cracks and quietly allowing Euro Zone members to ignore most of the rules set up when the European Common Currency was launched.
A critical problem is that the Common European Currency has really been a collection of “sovereign” currencies being described as the Euro. If it had been a genuine Single Currency, there would have been a single economic policy and the only sovereign debt would have been common to all members. The reality is that a blind eye has been firmly turned to each member, following local policies and running up significant debts as though it was still using its own national currency.
As the weakest members began to run into very serious economic trouble, the Eurocrats tried seeking help as though each weak member had its own national currency. Taking IMF loans to prop up any individual Euro member would appear to be against the IMF’s own rules because a Euro Zone member can’t agree terms in the way a sovereign nation in debt is able to. Looking at the IMF rules and conditions, it would appear that they should be talking to a single body and looking at the total debt of the Euro Zone, not just at the debt of one member.
The exploitation of the emergency funding system, set up by Brussels to deal with earthquakes and floods, appears even more of a fiddle. Countries like Britain, who are outside the Single Currency Euro Zone should not be required to donate their taxpayers’ money to prop up the Euro when the current crisis has been created by profligacy within the Euro Zone and a failure to establish a reliable economic policy to govern Euro Zone members.
Britain is being hit twice, once as an IMF member being required to pump in money against IMF rules, and then a second time as the Eurocrats attempt to extort money as though Britain was a Euro Zone member and beneficiary. The main result is a further hardening of public opinion against EU membership, with recent surveys showing a referendum to leave the EU would achieve 73% in favour of leaving and 12% against. The current 15% don’t-knows are showing signs of coming down in favour of leaving. The frantic Eurocrats are trying to throw a bone to British taxpayers by suggesting the failed fisheries policy may be changed after 35 years of consistent failure. Although the fisheries policy has been widely condemned for years, it has almost totally destroyed the British fishing industry and so seriously damaged fish stocks, that any benefit from a belated reform would take years to show even minor benefit.
As long as Greece and Ireland were the only Euro Zone members in total economic melt down, the Eurocrats were able to put off the evil day when accounts had to be settled. Greece, Ireland, Portugal and Spain accounted for a relatively small percentage of total Euro Zone debt and the power of the German economy kept creditors happy. Now that Italy has joined the Euro Zone members on the brink of collapse, the numbers have rapidly changed. Suddenly, Euro Zone members on the brink of bankruptcy account collectively for almost a third of the total Euro Zone debt. That is forcing credit agencies to add more members to the junk status that will make it almost impossible for those members to borrow on the commercial markets and any loans that they can broker will be at extortionate interest rates.
What is starting to generate real panic in the markets is that the only Euro Zone members yet to get into real difficulty are France and Germany. If each country had a genuine sovereign debt, only Germany would inspire any level of confidence. If the Euro Zone was regarded as a genuine single currency with a single sovereign debt, the whole zone would have achieved very low credit ratings as a collective and possibly junk status.
This creates an enormous problem for the global economy and is starting to continue the parallels with the Great Depression. So far, most countries have avoided becoming isolationist but there are signs that this is beginning to change.
During the next year, the world will teeter on the brink. Mistakes by a small number of politicians could cause a widespread crisis with recovery taking decades and increasing the prospects for global conflicts.
The Eurocrats have done great damage in attempting to paper over the crisis. Economists are increasingly seeing a failure to allow weak Euro Zone to become bankrupt as a cause for a far greater disaster that will engulf the global economy. What should give great cause for concern is the total lack of reality in Brussels. At a time when countries within the European Union are cutting debt, Eurocrats are demanding even greater increases in their budgets and demonstrating a desire to spend on an even greater scale than failed economies such as Greece.