They can try to 'delay and pray' but the euro is running out of time … As a doomsayer from the start, who has written several times on the subject, I have recently been reluctant to burden my readers with more jeremiads about the euro. 'Why is the euro in crisis? Because it was fundamentally flawed at its inception.' But fasten your seatbelts. Here I go again. My excuse is that this crisis keeps surprising the unwary. There is so much to say that I will have to have several bites. Before we can find solutions, which I will discuss at a later date, first the causes. – UK Telegraph
Dominant Social Theme: The euro is in great shape! Just ask Brussels!
Free-Market Analysis: Roger Bootle, managing director of Capital Economics and economic adviser to Deloitte, is out with another article critical of the EU and the euro. The article itself is not part of a mainstream dominant social theme. In fact, it is important for the elite to keep the EU together and to maintain the solvency of the euro. However, the article is representative of a number of negative articles about the euro and the EU. This means the elites behind the project are having increasing difficulty with its promotion. And that's notable.
Bootle and many others writing today in mainstream publications increasingly believe that EU and the euro are due for a significant setback. Any EU defeat would tell us a good deal about the ability of the Anglosphere elite to hold its plans together in the face of significant difficulties. It would also make it harder for the EU to expand.
Only good luck, strong economic growth and enlightened economic management could keep the euro together, he writes, and then provides us with "four things" that have virtually ruined the EU experiment. Predictably, the first involves "private sector" failures. (One must religiously blame the private sector for SOMETHING if one wishes to write for a mainstream publication.) Spain and Ireland went on a private sector spending spree, he informs us, though how he has arrived at this conclusion is puzzling (because it is wrong). He comes closer to the mark with Greece, where he writes that the "government led the bonanza."
The second problem was that the bond markets were hopeless imposed bond yields on the PIGS that were "only marginally higher than on Germany." The third and fourth were failures of government: "The authorities presided over an extremely shaky banking system, acutely vulnerable to shocks. And their policies over many years resulted in a high government debt to GDP ratio, not only in the peripheral countries, but also in the supposedly solid core … European authorities grossly underestimated the possibility of sovereign default as a realistic threat and market worry, and underestimated its capacity to cause a full scale banking crisis."
Bootle mentions what we have often noted, the arrogance of the political elite in denying voters of the Eurozone "the chance to say whether they approved of the euro and other aspects of integration." When various countries (the Irish come to mind) voted "no" a revote would be scheduled and Eurocrats would flood the country with money and advertising.
The overreliance on public relations during the good times meant that the EU literally never built the kinds of political superstructure that might have proved useful when times changed. It was convenient in the good times to have undemocratic environment. It was … efficient. But now the bad times are here and those at the top have no idea of how to create legitimacy. They just keep on giving orders and formulating dictats.
Bootle gets the math right in our view. "Greece's sovereign indebtedness is so high that it is impossible to see how it can honour its debts without outside help (ie. gifts). And the economy will go on contracting for years. There will have to be "an event". The only issues are when this will happen; who will pick up the tab; and what it will be called … But default it will be." Here's his conclusion:
Who picks up the tab is important because the bill could seriously undermine some banks. Remarkably this threat includes the ECB itself because it has taken on a large amount of Greek debt. The rows over the bill are likely to delay any sort of solution and to poison the atmosphere between member states. Meanwhile, the fate of the European banking system will be hanging by a thread.
This is why the "when" issue is so important. The current approach is to try to stave off the event until things get better. You will notice that this bears a striking similarity to the sophisticated strategy adopted by British banks in the face of dud commercial property loans, namely "delay and pray". Mr Micawber had the same idea but expressed it differently.
So even though the markets cannot cause the euro to break up by exchange rate pressure, they can cause an internal financial crisis worse than any currency panic. The prospect, or the reality, of such a crisis could yet cause some European leaders to precipitate the end of the euro as we know it.
We noted, above, that Bootle had to blame the private sector for what occurred, at least partially. This is part of writing for a mainstream publication. The private sector – capitalism – is always to be blamed for "market failure." Of course. There is failure, but it is the failure of ENTERPRISE, not of the larger market.
But Bootle has to have a market failure to balance out the substantial government ones. In fact, as we have often pointed out, the EU itself and the EU banking system handed out hundreds of billions of euros in aggregate to the PIGS in order to "rebalance" their economies and make them "healthy enough" to join the dour, solvent North. (This is a myth, too, but one that requires another article.)
Anyway, what the Southern Europeans did predictably was to have a party with all that free money. It got splashed around liberally to government agencies and to private contractors. Everyone stashed euros in Swiss banks and faked the paperwork. To say this was NOT an open secret would be an egregious misstatement. The Southern elites were simply BRIBED to go along with the EU program.
The Eurocrats themselves and the profound cynically Anglo-American banking families that run the show were well aware that a crash was coming. The EU was acting liked the World Bank – encouraging the PIGS to spend, spend, spend. Inevitably, in these situations the IMF shows up, as it has. It was right on time, so far as the Eurocrats were concerned. The PIGS, lubricated by money, had squirmed into the EU. Now, with the economic crisis descending, citizens would pay (and the Euronet itself would tighten as Eurocrats gained more control).
Only it hasn't worked out quite that way, or not yet anyhow. Apparently, one of the hallmarks of the IMF is to squeeze countries until people are literally rioting in the streets. But it is one thing to inflame Argentina and another to inflame a dozen European countries all at once. Our perception is twofold. The IMF and its masters have underestimated popular resistance in the Era of the Internet. (We shall see.) Second, they underestimated the profligacy of the PIGS and the viciousness of the downturn.
It's not hard to judge whether or not the Eurocrats and their elite bosses have miscalculated. If even one or two countries end up severing themselves from the euro, this will be an enormous failure. We've already pointed out a number of times that with their memes failing, the Anglosphere elites have increasingly begun to rely on violence. But the more one uses violence, the more victories one has to gain. A single loss can puncture the fearful inevitability that one is trying to establish.
The elites are in no position to experience high-profile public setbacks. This is one reason why they are struggling so hard in Afghanistan. The elite posture has been transformed in the past several years into one of "immoveable rigor." But in a sense this only makes the job harder. And if even one little Piggy steps out of line, it will be seen as a severe diminishment of elite control, generally. Given the essentially authoritarian nature of the EU, we hope such an event is visited upon the Eurocrats sooner than later. Bootle seems to agree with the possibility.