There’s always a silver lining … and this time it is perhaps that people are really starting to think about the EU and the euro instead of just shrugging their shoulders and treating them like the weather; something often horrible but that you can’t do anything about.
And this serious thinking is bringing out some excellent articles, of which my favourite today was this by Ambrose Evans-Pritchard. Things are moving so fast and with so much comment that it is hard to take it all in. However, Mr Evans-Pritchard makes these points which MUST be repeated. As many in Britain have come to realize, the not-so-hidden agenda all along has been to create a single super-state in Europe. Van Rompuy confirmed this openly just a few days ago. What has astonished me is the lack of reaction from, for a start, Germany and France to this … are they REALLY prepared to give up sovereignty to this point? Make no mistake, the EU elite will try to use the crisis to seize control of the economies of those countries it bails out, just as my local bank manager will impose conditions on me if it has to bail me out – not that it would of course …. the bailing out goes in the other direction for the plebs.
So the “harmonisation” they dream of will be complete. 80% of our law is ALREADY made in Brussels; soon it will be 80% of our economic policy. They claim this is “the only way”. Utter rubbish, of course. I don’t notice Scandinavia queuing up to be swallowed up by Brussels, or Switzerland come to that, mainly because they are quite happy as they are.
The truth is that ordinary Europeans are suffering a lot – and it is going to get worse – but this is entirely due to devious, lying reckless behaviour on the part of the EU elite. When will the sleepy plebs realize this and become as angy as I am? Here is what Mr Evans-Pritchard says. For me it is devastating accusation that the feather-bedded and pontificating elite in Bruxelles must answer to and pay for.
Jacques Delors and fellow fathers of EMU were told by Commission economists in the early 1990s that this reckless adventure could not work as constructed, and would lead to a traumatic crisis. They shrugged off the warnings. They were told too that currency unions do not eliminate risk: they merely switch it from currency risk to default risk. For that reason it was all the more important to have a workable mechanism for sovereign defaults and bondholder haircuts in place from the beginning, with clear rules to establish the proper pricing of that risk.
But no, the EU masters would hear none of it. There could be no defaults, and no preparations were made or even permitted for such an entirely predictable outcome. Political faith alone was enough. Investors who should have known better walked straight into the trap, buying Greek, Portuguese, and Irish debt at 25-35 basis points over Bunds. At the top of boom funds were buying Spanish bonds at a spread of 4 basis points. Now we are seeing what happens when you build such moral hazard into the system, and shut down the warning thermostat.
Mr Delors told colleagues that any crisis would be a “beneficial crisis”, allowing the EU to break down resistance to fiscal federalism, and to accumulate fresh power. The purpose of EMU was political, not economic, so the objections of economists could happily be disregarded. Once the currency was in existence, EU states would have give up national sovereignty to make it work over time. It would lead ineluctably to the Monnet dream of a fully-fledged EU state. Bring the crisis on.
Behind this gamble, of course, was the assumption that any crisis could be contained at a tolerable cost once the imbalances of EMU’s one-size-fits-none monetary system had already reached catastrophic levels, and once the credit bubbles of Club Med and Ireland had collapsed. It assumed too that Germany, The Netherlands, and Finland would ultimately – under much protest – agree to foot the bill for a ‘Transferunion’.