The Eurozone Crisis seems to be going on and on. Recent remarks by Mervyn King just serve to underline the fact that the British press, banking and political classes seem to have no understanding of the issue.
Lets start at the beginning. The Eurozone was a product of the Maastricht Treaty. Our press covered this treaty as a few technicalities that Thatcher managed to resist but Maastricht was understood by all of the countries involved as the move towards European Union - a single European State. British readers will "tut-tut" at this but please consider the following 1999 paper by the European Central Bank: Europe: Common Money - Political Union? before you tut-tut too much.
In this paper it says that:
"The monetary order established by the Maastricht Treaty with the detailed statute of the European System of Central Banks by itself represents an important building block for the development of a European statehood."
The importance of the connection between monetary union and the establishment of a single state was well understood at the new European Central Bank in 1999:
"So what does the future hold? Anyone who believes in the role of a single currency as a pace-setter in achieving political unity (Europe will be created by means of a single currency or not at all (Jacques Rueff 1950)) will regard the decisive step as has having already been taken. This does not provide an answer as to how the "rest" of the journey should be approached. "
The paper also foresees the current dilemma:
"There can be no turning back, as the failure of Monetary Union would not only be extremely costly from an economic point of view, but the political fallout would be unimaginable and would be tantamount to a catastrophe. The brightest and most respected former sceptics have conceded this much and now share the conviction that, once it has been set in motion, European Economic and Monetary Union must not fail."
So anyone who wonders why the Euro crisis is dragging on and on does not appreciate that the Europeans are playing for very high stakes indeed. (Click here for an insight into the German and Italian view of Europe.)
The crisis will drag on unless, as seems likely, Greece elects a government that absolutely refuses to accept the terms of the "bailout". This will lead to the expulsion of Greece from the Eurozone although the Greeks will still be able to spend Euros in the same way as the Cubans use US Dollars as a currency. (Bizarre but true, Cubans spend US Dollars and do not have their own currency).
In many ways the expulsion of Greece will settle the Eurozone Crisis. Italy and Spain will see what happens to Greece in the first couple of years after exit and will accept whatever the Germans tell them to do afterwards.
This brings us to the last problem: given that everyone in Europe understands that a single European State is being created why are our media telling us something different? See The London Riots and the Mediocracy.
UPDATE by ECB on 20/07/2012
How does the European Central Bank see the crisis evolving? Here is an extract from an ECB approved presentation on the subject, Short Term Crisis Management and Long Term Vision, describing the 4 steps to a solution:
See also:
The World Financial Crisis
On being "outside" in Europe. Isolated or free?
The Eurozone, EU, Cameron and Crisis
Globalization and Great Depressions
Europaische burgerkrieg anyone? The Germans lost the 'European Civil War' in 1945
Lets start at the beginning. The Eurozone was a product of the Maastricht Treaty. Our press covered this treaty as a few technicalities that Thatcher managed to resist but Maastricht was understood by all of the countries involved as the move towards European Union - a single European State. British readers will "tut-tut" at this but please consider the following 1999 paper by the European Central Bank: Europe: Common Money - Political Union? before you tut-tut too much.
In this paper it says that:
"The monetary order established by the Maastricht Treaty with the detailed statute of the European System of Central Banks by itself represents an important building block for the development of a European statehood."
The importance of the connection between monetary union and the establishment of a single state was well understood at the new European Central Bank in 1999:
"So what does the future hold? Anyone who believes in the role of a single currency as a pace-setter in achieving political unity (Europe will be created by means of a single currency or not at all (Jacques Rueff 1950)) will regard the decisive step as has having already been taken. This does not provide an answer as to how the "rest" of the journey should be approached. "
The paper also foresees the current dilemma:
"There can be no turning back, as the failure of Monetary Union would not only be extremely costly from an economic point of view, but the political fallout would be unimaginable and would be tantamount to a catastrophe. The brightest and most respected former sceptics have conceded this much and now share the conviction that, once it has been set in motion, European Economic and Monetary Union must not fail."
So anyone who wonders why the Euro crisis is dragging on and on does not appreciate that the Europeans are playing for very high stakes indeed. (Click here for an insight into the German and Italian view of Europe.)
The crisis will drag on unless, as seems likely, Greece elects a government that absolutely refuses to accept the terms of the "bailout". This will lead to the expulsion of Greece from the Eurozone although the Greeks will still be able to spend Euros in the same way as the Cubans use US Dollars as a currency. (Bizarre but true, Cubans spend US Dollars and do not have their own currency).
In many ways the expulsion of Greece will settle the Eurozone Crisis. Italy and Spain will see what happens to Greece in the first couple of years after exit and will accept whatever the Germans tell them to do afterwards.
This brings us to the last problem: given that everyone in Europe understands that a single European State is being created why are our media telling us something different? See The London Riots and the Mediocracy.
UPDATE by ECB on 20/07/2012
How does the European Central Bank see the crisis evolving? Here is an extract from an ECB approved presentation on the subject, Short Term Crisis Management and Long Term Vision, describing the 4 steps to a solution:
The first is a financial union, with a single framework for supervising and resolving banks and for insuring customer deposits. This would build on the single supervisory mechanism now under development and ideally lead to a European version of the FDIC, financed by contributions from the private sector.
The second building block is a fiscal union, with powers at the euro area level to prevent unsustainable fiscal policies and to limit national debt issuance. With these powers in place, a path towards common debt issuance would also be possible, but only at the end of the process.
The third building block is an economic union, which would help euro area members to remain fit and to adjust flexibly within monetary union. This could entail, for example, moving from soft coordination of structural reforms in Member States to an enforceable framework at the euro area level.
And the fourth building block is a political union, which aims at strengthening democratic participation. This final building block is equally important, as the other measures cannot be effective unless they are legitimate. This requires innovative thinking as regards the involvement of the European Parliament and national parliaments in decision-making on euro area issues.
See also:
The World Financial Crisis
On being "outside" in Europe. Isolated or free?
The Eurozone, EU, Cameron and Crisis
Globalization and Great Depressions
Europaische burgerkrieg anyone? The Germans lost the 'European Civil War' in 1945
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