EU Mess, Libertarian Foretelling …
By Staff News & Analysis - April 11, 2013

Italy and France Pose Grave Risks to Euro Zone, Report Says … The uneven performance of economies using the euro is one of the main reasons for the severity of a debt crisis in which some of the worst affected countries were able to borrow more than they could repay. France and Italy are among the nations in the beleaguered bloc that need to accelerate the policy changes needed to improve their competitiveness and help the euro zone exit a lingering economic crisis, said Olli Rehn, the European commissioner for economic and monetary affairs. – New York Times

Dominant Social Theme: It's getting better all the time.

Free-Market Analysis: Is it really getting better? And how long can top EU officials keep warning people about Eurozone instability?

Now it appears that France is being drawn into the mess that is the European currency crisis. This has all been predicted, by the way, just not by Eurocrats. It has been predicted in the libertarian media endlessly but you will find no mentions of these predictions in the mainstream.

In fact, the free-market paradigm is immensely predictive. Central banking, single fiat currencies and the paraphernalia of authoritarianism carry the seeds of their own destruction. Human action, as postulated by Ludwig von Mises in his great book by that name, will have its way. Central planners will always get it wrong.

As Brussels officials stream away in various expensive EU headquarters, ducking and running as wreckage bombards them, we can only point out that "we told you so."

Incredibly, this message has yet to penetrate top Eurocrats like Rehn, however. They are still fighting a rearguard action to pretend all is well and that events in the Eurozone have not spun out of control.

While the Union has made some strides in rebalancing its economies, "it will take some time yet to complete the unwinding of the imbalances that were able to grow unchecked in the decade up to the crisis, and which continue to take a toll on our economies," Mr. Rehn said at a news conference.

A failure to address the problems in France could be particularly serious for the well-being of the common currency, Mr. Rehn said during a presentation of an annual report comparing the health and competitiveness of a number of Europe's national economies.

"France is, in terms of its size and geo-economic position, a very significant member of the euro zone and its health has a very direct impact on the overall health of the euro zone," Mr. Rehn said.

Mr. Rehn's approach has previously come in for tough criticism from some U.S. officials and the International Monetary Fund, which have warned that his calls for more austerity are self-defeating in cases where it restrains economic growth, leading to wider deficits and making it harder for governments in already weakened economies to pay down debt.

Gross domestic product in the 17-nation euro area is expected to shrink 0.3 percent this year, while the 27-nation Union will grow just 0.1 percent, according to forecasts made by the commission in February.

But Mr. Rehn also echoed calls made earlier this week by the U.S. Treasury secretary, Jacob J. Lew, for Germany, the biggest economy in the euro zone and one of its most robust, to do more to spur spending and help revive growth.

"I still believe, and the commission still believes, that there is much more Germany can do in order to boost its domestic demand," Mr. Rehn said.

Really, Mr. Rehn? Haven't you noticed German euro fatigue? Something like 70 percent of Germans – or maybe more, depending on the poll – want OUT of the euro. And maybe the EU, as well.

The Great Conspiracy – we don't know what else to call it – to create an economic crisis in order to deepen a political union seems to be coming undone.

Among others, we predicted this, too. Euroleaders are on record going back decades as saying it would take a lingering crisis to create the kind of European United States that they sought.

We always thought these grandiose plans were a bit bizarre. But in the Internet Era they are increasingly far-fetched. People at this point are well aware they are being manipulated and they don't like it. Hence, the German resistance.

Italy, Portugal, Spain, Greece, Ireland, Cyprus and now France. Nowhere is the "crisis" resolved, and nowhere does it seem to be diminishing.

Every time we get an announcement, the official declares that the proverbial corner has been turned – and then presents the world with yet another failing EU member-state.

Now it is France's turn. France is a lynchpin of the EU, and last we looked, French voters had voted against the failed EU constitution. The French don't want a deeper union any more than the Germans do.

Eurocrats with typical arrogance can overlook this growing antipathy. But trees do not grow to the sky and sooner or later European resentment against this increasingly destructive scheme is going to come to a boil.

Rehn and the rest of his cronies seem confident that they can surmount the crisis and make it work to their advantage. It is a deeply cynical game and one that has been undermined by widespread reporting of its reality and the calculations behind it.

The Internet, like the erosion of support for the EU itself, is a process not an episode. The trends are moving away from the EU and the euro. We don't see anything that significantly counteracts them. If we did, we would mention them. But we don't.

After Thoughts

And that has significant political, monetary and, of course, investment ramifications.

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