The financial crisis we are witnessing in Europe "is as much political as economic" and the result of the fact that the euro area is not supported by the institutional paraphernalia of a state and why? Because you simply cannot do a monetary union without adopting a common fiscal policy and creating a supra-European central bank that oversees and directs the various member state national banks at least in theory while in practice it is absolutely toothless without a common political will. This has always been the “Achilles Heel “of the European Union., aggravated by petty nationalisms and a political class totally hell bent in importing all the negatives from the USA, who cannot seem to grasp that the “laisser faire unregulated” capitalism of the US cannot be compatible with European economics and democracy.
The other inherent weakness of European countries as whole, with probably the exception of the UK, though there has been an exponential increase in bureaucracy in the UK in the last 10 years, is that in effect The State is the biggest employer. This creates the “Culture of the life time expectancy of the security of state employment* in people, especially in countries like Italy, Spain, Portugal, Greece, France where a massive and useless bureaucratic infrastructure has grown over the years to accommodate and justify such state of affairs. This also opens the Pandora ‘box of political patronage and corruption where such positions are exchanged as favours or as payback for political support during national or local elections. This practice has the unsavoury negative collateral side-effect to put total idiots in charge of key government departments, thus perpetuating a cycle of incompetence and reduce substantially any resistance to illegal corruptive influences by private interests groups.
The running of such monolithic and unaccountable state bureaucracies creates the economic necessity for the Government to impose an excessive system of direct and indirect taxation is levied on the national private industrial infrastructure, professional categories such as lawyers, accountants, engineers and on the middle and working classes that eventually suffocates and kills the other major employer in a nation that is the small and medium privately owned enterprises. The big multinationals have many ways of avoiding these types of taxes as their global structures allows them to wiggle out of most of the national taxations, and of course their unlimited financial clout allows them to buy and control politicians.
This culture of useless national bureaucracy has of permeated into the European Union institutions, where whole departments create and write endless” books” of idiotic rules and regulations that can, to their most ridiculous apex, even relate to a 100 pages manual so as to determine the accepted diameter of a French Camembert, or to determine the length and width of an Italian Salami.
Add to this that the structure of the Eurozone as a monetary union without fiscal union which means that its member state has its own tax codes and pension schemes has been a major contributor to the present crisis and has impacted the ability of European leaders to respond. European banks that own a significant amount of sovereign debt, thanks to globalization are so interlinked with their American and Japanese counterparts that once the crisis began in the US, the domino effect was inevitable and the resulting concerns over the solvency of our banking systems made the credit bubbles burst like sores all over the EU.
In effect the EU was a very fragile giant, and speculators were very aware of this. And let’s face it both the present financial crises here in the EU and the US are the work of carefully planned speculations of a bunch of unscrupulous very wealthy gamblers that thanks to deregulation, lack of rules and supervision have been allowed by corrupt politicians on both sides of world to access our private deposits and savings in banks and play with our money the game of betting on hedge funds and futures. According to The Wall Street Journal several hedge-fund managers launched large bets against the euro in early 2010. On 8 February, 2010 the research and brokerage firm Monness, Crespi, Hardt & Co. hosted an exclusive “ dinner" at a private townhouse in Manhattan, where a small group of hedge-fund managers from SAC Capital Advisors LP, Soros Fund Management LLC, Green Light Capital Inc., Brigade Capital Management LLC and others had good insider knowledge that the euro was going to fall to parity with the US dollar and had prior knowledge through the Dellaggio and the Vanderbarten foundations in Athens that Greek government bonds represented the weakest link of the euro and that a concentrate speculative attack would tumble Greece and that the “plague” of Greek contagion could soon spread to infect all sovereign debt in the world.
No one realised that three days later the euro was hit with rumours and a wave of selling, triggering a decline that brought the currency below $1.36. On 8 June the Euro hit a four year low at $1.19 before it started to rise again. Financial Operators estimate that bets for and against the euro account for a huge part of the daily three trillion dollar global currency market. The profits made by 1% of private individuals run into billions.
The remedies our politicians tried to implement came too and did little to stem the crisis. Now with the last Council Of Europe our “illuminated leaders” are adopting he proposals that the heads of four EU institutions -- European Council President Herman Van Rompuy, Euro Group President Jean-Claude Juncker, European Commission President José Manuel Barroso and European Central Bank President Mario Draghi -- had sent to the 27 governments early this year . They propose a comprehensive reorganization of European economic policy in four areas:
■ Banking union: In a first step, national deposit insurance funds could be combined to form a European fund. This fund would later be augmented with a Europe-wide bank charge. In the future, the money could also be used to help banks in trouble. If the four leaders have their way, a new watchdog agency would not just regulate the major banks, but all financial institutions. The new agency would be located at the ECB.
■ Euro bailout fund: The European Stability Mechanism (ESM) is to be given the power to finance ailing banks directly. This would eliminate the need for an individual country to apply for bailout funds and fulfill additional requirements.
■ Jointly issued debt: To reduce government debt, the authors recommend a debt redemption fund to pay off pre-existing debt, as proposed by the German Council of Economic Experts. In the long term, however, the four EU officials want a different model, in which no country in the euro zone would be allowed to take on new debt without the consent of the other countries. They also propose a European debt agency.
■ Fiscal union: The proposal calls for the introduction of a financial transaction tax and the uniform assessment of corporate tax.
These seem far reaching but do not address the core issues that render fragile the EU. The whole concept of the EU was one of hope, an exorcism of the past demons that have plagued Europe for centuries, the religious wars, and the never ending competition between France, Germany, and England for domination of the Continent and we are very close to achieve this. The Fascist regimes of Portugal, Spain, Greece, Italy and Hitler’s Nazis are finally in the dustbins of history. The Communist puppets in the East are now independent nations and members of the EU. So now what really we have to decide whether we will allow our politicians to mimic and import that brand of American cowboy Capitalism that wants no rules and that favours only a minority of the Americans, or have we finally realised that that brand of Capitalism is totally incompatible with democracy as we intended, and that bond markets and bankers do not control our destinies we do!
I have heard politicians say that we cannot compete against the agglomeration of financial power that globalization created, wrong we can and we should. We don’t need Socialists, Communists, Liberals, Conservatives, Social Democrats; all we need is men and women of integrity and guts to represent us.