Birth of the Forth Reich?


As the Third Reich was born out of the chaos of the Weimar hyper-inflation and the Great Depression, the Forth Reich is being born out of the failure of the Euro.


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The long awaited Euro meeting turned out to be an economic damp squib, but a major political event. Germany, with France in tow, failed to provide the concrete reassurances that markets were hoping for. To relieve pressure on the Euro, the markets needed to know that Euro Zone countries would be issuing joint bonds underwritten by Germany. Although that emerged as a more distant possibility, Reich Chancellor Merkel concentrated on the German vision of a German-led Europe where other nations would be told what the Germans were prepared to accept as regional policies and what the Germans had decided would be the economic policy for Greater Germany and its subordinate nations. There is little new in this concept having already enjoyed its first outing in 1940 when Germany controlled Europe with the exception of Great Britain, Eire and Sweden.

The German concept of European domination is logical to German politicians and the political centre will become Berlin as in the last attempts to rule Europe. France can be depended on to collaborate although other Euro nations may have difficulty in accepting the situation.

Although logical to German politicians, it may fail to receive approval from citizens in any of the Euro Zone countries, including Germany. It may also fail to satisfy the financial markets where confidence will erode if there are no immediate concrete proposals to deal with the mountain of Euro Zone debt and issue bonds that are underwritten strongly by a credible resource.

In the 1930s, Hitler was aided by German bankers who were prepared to come up with a series of devices to hide the weakness of the German economic position. Reich Chancellor Merkel may not have that level of financial connivance.

The great unknown is how the people of Europe will react and how much shrinkage may occur in the Euro Zone before the finalization of the political accords. The European Union Members are not all members of the Euro Zone and several EU Members planning to join the Euro have been thinking again. The markets may now start to pick off the PIIGS, starting with Greece, Portugal and Italy. If the five PIIGS countries are forced out of the Euro Zone, the remaining twelve will come under new pressure that cannot be reduced by Germany because, as the markets have come to realize, Germany does not have the resources to prop up the rest of the Euro Zone. The voters in those countries may also take a strong view against the Euro. Merkel is most at risk in her own country. West Germans have stoicly accepted increased taxation and economic constraints to absorb East Germany. The German nationalism and support for a Greater Germany was an important factor in accepting difficulties to achieve re-unification. There is clearly less appetite to accept even greater constraints to bring the non-German Euro countries into the German economic sphere.

Looked at in pure economic terms, the only way to give the Euro sufficient strength to resist pressures from the markets is to have a single economic policy. That policy will only work if there is a clear central government that is able to apply the policy to every part of the zone and enforce the policy without exceptions. The history of the Euro has shown that the Single Currency is a sovereign currency in name only. In the past the rules have been bent, fractured and torn up to allow the weaker members to avoid difficult economic decisions and engage in unsustainable borrowing. That only functioned as long as the global economy was enjoying annual growth year after year. On the evidence of the Euro’s history, only Germany is strong enough to decide policy and enforce it. The difficulty is that German history demonstrates the dangers of allowing German politicians to enjoy that much power.

If Germany does become the ruling body in the Euro Zone, it is realistic to expect the number of Euro Zone countries to shrink, some perhaps sacrificed by Germany to ensure adequate resources to sustain the rump.

It is also realistic to expect Britain to leave the European Union and establish trading agreements to continue free trade opportunities. The EFTA zone still exists even though EU membership for EFTA nations made it an artefact of history. It is possible, and perhaps desirable that the EFTA zone replaces the EU, with the new Greater German economic zone as a member of EFTA or with Germany treaty relationships to EFTA. All of the EU bureaucracy becomes irrelevant in a Europe where Germany controls a central European block, possibly including France. Britain would become the major beneficiary having been relieved of the unfair tax burden EU membership has imposed.

Taking the possible consequences of the German declaration of dominance, Europe is about to enter an even more turbulent period and the declaration may become one of the most important acts in European history.

BSD News Desk

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