As my biblical namesake said: 'Thou art weighed in the balances, and art found wanting' … The EU is now proposing to issue its own bonds, as a step towards a single euro-zone bond market. And who will be backing these bonds? Why, the already indebted national governments, several of which are struggling to pay off their own bonds. Debt is piled upon debt. – Daniel Hannan/UK Telegraph
Dominant Social Theme: We need to get serious about this project. No more freelancing. Let's issue our debt properly through one facility.
Free-Market Analysis: Daniel Hannan, a British parliamentary representative who is well known for his anti-EU stance, believes the European Union leadership has in mind issuing its own bonds – not hypothetically but in the near future. From his point of view this would be another step toward creating a full "EU nation," which most emphatically he does not desire. There is no denying, that centralizing EU forces continue to exert a powerful influence on the EU. And such EU-wide fixed-income instruments would only buttress another Brussels'-centric move by the EU we reported on in mid-March. We wrote the following then:
Why the current crop of Eurocrats believes they can build such a powerful project via misdirection, back-room dealings, secret political pressure and outright lies is puzzlement to us. Such manipulations usually end unhappily. The larger public – in its hundreds of millions – eventually perceives such structures as having no legitimacy. This doesn't seem to bother Brussels however, or not at the moment. New rules will attack two aspects of national spending: annual government budgets are now to be examined by Brussels and "all economic policies" as well. The new regime will emphasize reductions in overall government debt.
Read more here: Silent Coup: EU Takes Over Europe?
Like another prominent anti-EU politician, Nigel Farage, Hannan would rather see Britain out of the Union entirely. His article in the UK Telegraph yesterday did not sound the alarm for the very first time. He's written about the subject before in a rather brief article that appeared in the Telegraph in January. The idea has received limited coverage elsewhere: In mid-March, Bloomberg posted a fairly elaborate article entitled "ECB's Bini Smaghi Calls for New European Bond Issuing Agency." Such a new agency with debt issuance authority becomes a kind of Euro-Treasury department, one might speculate.
Smaghi came up with the idea, according to Bloomberg, because the EU didn't have influence over the issuance of debt of individual states, yet had to grapple with the consequences – as apparent in the current Sovereign Crisis. His solution, as laid out in a speech in Italy, called for ensuring: "that the discipline is actually binding is to empower a supranational entity in the euro area to issue government bonds for the member states … The countries would in fact no longer have the capacity, technically or politically, to issue public debt on the market. This could be a first step toward a single European bond."
He also had the honesty to make the point that the idea was something of a provocation, especially to Germans who are already hypersensitive to possibilities of shouldering increased euro-zone debt. The Bloomberg article reports his speech tried to downplay various ramifications of his debt proposal, claiming it would not involve a common tax system, just integration of securities issuance facilities and an "allocation" methodology. He did admit the point of it all: Giving the EU additional control over state spending and a formidable weapon influencing the entire budgetary process.
"To reduce the dependence of the euro area as a whole on local events the link between a country's public finances and its national banking system needs to be severed," Smaghi said. Hannan disagrees with all this. He writes in the Telegraph: "I have argued before that Britain must refuse to join in any bail-out of Portugal, on grounds that such a bail-out would be bad for Portugal, bad for Britain and illegal under the EU's own treaties. We will not solve the debt crisis by taking out new loans. There must, in time, be a reckoning. "
Back in January, Hannan did more than complain. He announced the formation of the "The People's Pledge" – a major cross-party campaign for a referendum on EU membership – and claimed it might be successful unlike other such efforts. He based this perception on the ascension of the Tory party and David Cameron. The sticking point he said was Labour, but now that Labour was out-of-power, members of Labour might be more amenable to a referendum because it aligned them with majority British sentiments. Polls have regularly shown that the British want the opportunity to vote on continued EU membership (and would likely vote against it). Here's some more from Hannan back in January:
Of course, obedient to Hannan's First Law ("no party is ever Eurosceptic while in office"), they're not saying that now. But Hannan's First Law works in reverse, too. Sooner or later, Labour front benchers will stop thinking like ministers and start thinking like an opposition; and, at that moment, the temptation to place themselves on the right side of public opinion by backing a plebiscite may prove irresistible.
So it is significant that the People's Pledge draws the bulk of its support from the Centre-Left. Once it becomes clear that Labour is seriously considering a referendum (its position on the issue is currently said to be "finely balanced"), the other parties will have every incentive to get there first. The case for an In/Out referendum is almost unarguable. But reason, in politics, takes you only so far. You need numbers, too. So, please, go to our website and sign in support. Then email everyone you can think of and ask them to do the same.
The support, from what we can tell, has been significant and the People's Pledge is starting to have an impact on British politics nation-wide. Eventually, finally, Britain may get its EU vote. Thus, it would seem the EU and Britain may be moving in two different directions; and it is a bifurcation increasingly being acknowledged by the powers-that-be. Just yesterday we reported on an article in the Economist that dealt with the potential break up of the EU, at least at its "periphery." We pointed out that if the EU cannot be maintained as it is (or the powers-that-be don't wish to maintain it for some reason), then its break-up could provide a trigger for a further a global currency that has been proposed by the IMF, George Soros and others.
What is also true is that articles about the EU's devolution appearing in such elite-oriented publications as the Economist can be used as a justification for further efforts at EU centralization. The centralization is ongoing and a move toward issuing EU-wide bonds would be another significant step in this direction. Perceptions of "chaos" can support a continually more centralized EU as well as a drive toward a global currency. The elite in our view never propounds only one plan; there are back ups within backups, though the goal is always more powerful worldwide governance.
The EU as an elite promotion – a dominant social theme – seems to us in a delicate and critical stage. The Germans don't want to pay for the profligate PIGS, the Southern Europeans themselves are not apt to continually submit to "austerity measures" and Brussels itself is actively seeking more and more power over its member nation-states. The British opposition to the EU continues to grow and organize as well; with the advent of the Tory government, it has mounted what may be a definitive challenge to Britain's continued memberships in the EU.
Not much of what is going in the EU is being reported in depth by Western mainstream media, especially not in America. Yet thanks to the Internet, the issues involved with the EU have likely never been clearer and the activism more organized. Hannan's increasingly successful petition, for instance, is Internet-based. In our humble view, the centralizing tendencies of Brussels and the challenges the EU faces are bound to collide to collide sooner or later. We don't have any idea of the outcome, but it can surely be said that the EU has not yet fully addressed or integrated these trends and challenges. How they are resolved must have a significant impact on the West's larger economy and the American economy in particular. It may be that the larger EU crisis is just beginning.