Will the Eurozone crack? [Va crăpa Eurozona?]

More than three years after the Wall Street Crash of 2008, the unthinkable demise of the euro and the break-up of the Eurozone has (apparently) become plausible.

It’s getting crystal clear even to the most fanatic euroenthusiasts that any imminent economic cataclysm cannot be blamed on convenient scapegoats anymore.

The lazy Greeks, the irresponsible governments in Eurozone weak links countries (PIIGS), along with greedy bankers everywhere may have played relatively secondary roles in influencing the destiny of the EMU.

Nevertheless, the fate of the European currency has never been – nor is it in these very days of turmoil – in the hands of less important actors like the above.

The devil lies in the details of EU treaties and especially in the chain of misdeeds committed by the political leaders of Europe, whether acting unilaterally, from Berlin, Paris or Rome, or together, from Brussels.

Hardly could the roots of the current crisis be located in Frankfurt, as the ECB has seldom had its hands united by the heads of state and government reunited in the Council of the Union.

More and more independent economists show that the mess engulfing the EU and threatening to blow up the global economy has systemic causes.

The EMU is on the brink of disaster because it lacks several fundamental premises of an efficient monetary union; it is made up of an econimic ‘giant’ (Germany) with 16 ‘feet of clay’ of various strengths from stronger (France) and weaker (Italy) muscles to negligible appendices (Estonia).

The ECB could be reasonably functioning as a central bank (if allowed to act do so), yet there is no effective equivalent of a national Treasury (Ministry of Finances) or Government in Brussels.

For decades, EU leaders have been deploring the lack of a common defence policy (greatly compensated by NATO) or of a common energy policy (whose absence contributes to the fact that Europeans are often ‘energy hostages’ of Russia).

It was fashionable to complain about these issues, however, none was as divisive and able to threaten the survival of the EU as the other skeleton that the current crisis took out of the Union’s closet – there is no common fiscal policy of the EMU.

In its absence, sooner or later, the Eurozone would be doomed to crack, like some analysts anticipated in the late 1990s, if not even longer before, around the dawn of this project.

The flaws of the EMU were known from the very beginning but swept under a carpet of great expectations about increased common prosperity.

For a while, the illusion worked. After the first months of wariness, when many Europeans in euro countries were shocked by price hikes, almost everyone grew accustomed with a stable currency, no need for exchange rates, low inflation and bearable interest rates.

The Greeks, Spaniards, Portuguese and others had access to cheap credit, while their tourist industries cashed in strong euros, instead of weak drachmas, pesetas or escudos.

In the meantime, the euro was weaker than how the Deutsche Mark would have probably been in the 2000s, enabling Germany to be biggest world exporter in 2007, ahead of China.

The success story seemed complete, and many warnings (like the ones about Italy being unfit for EMU membership (+ here, here, here) – see the pics*** illustrating this article!) were bluntly dismissed as nonsensical soothsaying.

Actually, there’s growing evidence that it was well-known to the architects of the euro that the Eurosystem was ill conceived from the start.

This didn’t prevent them from taking a huge gamble on the hope that a severe crisis (like the one the world has endured since 2008) would eventually help establish a “a more perfect union,” like the Constitution of the USA aimed in 1787.

Is this imperfect monetary union perfectible? Are the 17 euro countries willing to take upon themselves the full political cost of making the EMU truly functional?

And could giving up more of one country’s sovereignty guarantee anything for the EU’s citizens (“we the people,” if we were to quote the US Constitution again), apart from helping save the banking system from collapse?

Will a ‘full fiscal union’ work better than the current ailing EMU? The Eurosystem would probably run smoothly, yet the imbalances between the 17 economies would remain as grave as they are today, if not even worsen.

Smothering public deficits from the cradle would not grant choices of more responsible political leaders to European voters; it would merely ignite more vicious political battles and maybe even ‘class conflict’ within nations.

And, riskier than anything else, wouldn’t this ‘EU Treasury’ remain as unaccountable to European citizens as other EU institutions and leaders that created the current ‘euro-mess’ have always been?

[For all the posts on this blog go to/Pentru toate postările de pe acest blog mergi la: Contents/Cuprins]

*** NOTE: Simon Tilford, from the Center for European Reform (London based think-tank), warned that “if Italy fails to improve its competitiveness, it will eventually have to leave the Eurozone” (2006).

About public transport in the UK (20) [Despre transportul în comun în UK]

Although there surely are ‘rivals’ all over Europe – especially in Germany (in Frankfurt etc) – the unofficial title ‘catherdal of train stations’ is probably well deserved by London’s St. Pancras International.

My pics don’t even catch the beautiful Victorian architecture of the main frontage… only the inside of this magnificent building, which has been the British terminus of the Eurostar since 2007.

The former ‘home’ of the Eurostar was Waterloo Station, an equally beautiful building, however, bearing a name deemed ‘offensive’ to the French ego. Today, the French Border Police can legally operate within St Pancras Int’l :-)

In multicultural London – where the French community is sizeable, while there are posters in Polish in bus stations – it’s natural that St. Pancras Int’l is a bit bilingual (pics 6 + 8).

Well connected to the big London Underground (1) and to all London’s airports, St. Pancras Int’l won’t spare people of hearing/seeing constant ‘terrorist warnings’ (2).

Apparently, the huge open space (7) makes it rather difficult for terrorists to hide, and the security checks are somewhat similar to those carried out in airports.

It’s hard to say whether the post-July 2005 bombings panic was considered when switching from Waterloo Station. Nevertheless, St. Pancras Int’l is not too big.

It can barely fit some of the people queuing because of chronic the delays of that are plaguing the Eurostar all year round, irrespective whether a ‘Big Freeze’ is taking a heavy toll on airports or not.

Travellers can at least enjoy a breathable air in summer or take cover from the rain and snow under the spectacular trainshed which truly resembles the dome of a cathedral.

Instead of an altar or iconostasis, corporate people from all over Europe (rushing to do business in the City of London) can’t miss the big clock (9 + 10) reminding them the religious precept ‘time is money’.

[For all the episodes of this series, and all the posts on this blog go to/Pentru toate episoadele din această serie şi toate postările de pe acest blog mergi la: Contents/Cuprins]

Witty bits from what I learned in the UK (18) [Vorbe de duh din ce am învăţat în UK]

It’s been over a year since the most tangible (and some of the most cherished I assume) European Integration project, the Euro, started to look threatened.

Half a year after the Greek bailout (May 2010) came the Irish bailout (November 2010), and another half a year later came the Portuguese bailout (May 2011). What will happen in the next six months?

The Eurozone appears to have run out of ‘weak links’ whose default and even exclusion from the EMU would not be altogether catastrophic but somewhat bearable.

There are now fears of a next (bigger, biggest?!) global financial crisis. And it could well start with the solvency problems of the weakest euro-giants: Spain and Italy.

To some, the question is when the EMU will eventually prove to be an utter failure. To others, what thay are speculating about is how this imminent break-up would be possible, and to what degree.

Will it be a complete return to the the 1990s, with all euro-countries turning back to their national currencies? Or will it rather be a contraction of the Eurozone, scaled back to a core of the most efficient economies that make it up today?

Finally, there are the others – equally narrow-minded as those who rejoyce what they think is the demise of the EMU, because of its insolvent members.

They are the fanatics who insist that “there is no plan B,” therefore the current monetary union ought to survive ‘no matter what’. That is no matter what misery could bring to some countries that should have been part of the EMU in the first place.

There’s no reason to be happy about the prospect of seeing the Euro scrapped as a failed historic experiment, while are also no sane reasons to hold on to the ‘no matter what’ position.

Both the consenquences of giving up the Euro and of trying to preserve the Eurozone as it is today appear to be nothing but disatrous.

Europe and the EU will have to change, irrespective of what happens to the common currency now used in 18 EU states (+ colonies and some non-EU countries).

The turmoil within the EMU spares no country of ripple effects, and – to a certain extent – the fate of the entire ‘civilised world’ as we know it today depends on the ‘fate of the Eurozone’.

Countries like the UK, with it’s GBP, will have slightly more freedom of maneuver, unlike the Euro-slaves tied to decisions taken in Brussels and Frankfurt. However, not even China, Russia, Japan, nor the USA will be spared of what is due to happen on the Old Continent.

The Age of Discovery, two World Wars, problems in the Middle East (and in other former European colonies), almost every ‘world event’ had and has to do with Europe. And now – with the Euro.

Before anything else, one big question should be: what will happen to Germany? How will this great nation cope with the break-up of the EMU, assuming that a ‘reduced Eurozone’ (to 10-12 countries, instead of 17) wouldn’t be such a cataclysm?

It’s worth rasing this question, because here’s another ‘witty bit’ that I learned in the UK, from a British economic analyst (married to a German woman :-).

Considering that “For the past 400 years, all wars in Europe were fought because of German rise to supremacy on the continent,” he described the Eurozone as being “the best way to deal with German hegemony.”

What will we Europeans do if this ‘best way’ will no longer be to hand? Will we have to return to the old ‘worst ways’ in dealing with the strongest nations on the continent?

It’s very likely that those who were not good at playing by the EMU rules won’t be good at ‘alternative ways’ for keeping the statu quo in Europe either :-(

What if all these that we take for granted now – six decades of peace, freedom of movement, European cooperation – were taken away from us? Without all these, even a silly ‘cucumber war’ could lead to a Third World War, couldn’t it?

[For all the episodes of this series, and all the posts on this blog go to/Pentru toate episoadele din această serie şi toate postările de pe acest blog mergi la: Contents/Cuprins]

Witty bits from what I learned in the UK (3) [Vorbe de duh din ce am învăţat în UK]

Q: By the time euro coins started to fill EU citizens' pockets (January 2002), many spelled the demise of London as the financial capital of Europe. Placed at he heart of the European Monetary Union and hosting the European Central Bank, the city of Frankfurt-am-Main was seen as the future New York of Europe. So why is it that, after six years, all those predictions turned out to be false?

A: Simply because the number of employees in financial services in London (retail and wholesale banking, audit and accountancy, consulting, brokerage, insurance, and so forth) is greater than the whole population of the German city.

Sheer size mattered this time, against all odds indicating that the financial center of gravity in Europe was very likely to move to Frakfurt. London has over 7,500,000 inhabitants (12-14 million in the metropolitan area), while Frankfurt only has over 660,000 people (out of a total of 5,800,000).

[For all the episodes of this series, and all the posts on this blog go to/ Pentru toate episoadele din această serie şi toate postările de pe acest blog mergi la: Contents/Cuprins]