Euro Crisis Deepens

from BATR:

The alarm warnings are going off in Europe. International markets under pressure, global tensions rising and the financial system stressed to the point of breaking. Europe is ready for a relapse. It may be a very cold winter without Russian gas. Yet the technocrats in Brussels just go on their merry way in dictating the future to the vastly different societies and economies that make up the EU block. The Guardian expands this theme in the article, The eurozone crisis – history is repeating itself … again.

“Monetary union is a textbook case of the dangers of allowing politics to trump economics. Germany is a completely different economy to Greece. Portugal’s economy is not a bit like that of the Netherlands. Italy was able to remain competitive in the pre-euro days only by regular devaluations of the lira. To yoke all these countries together in a one-size-fits-all single currency was an act of supreme folly.”

The predictable consequences that brings Back to reality The debt of some euro-zone economies looks unsustainable is a factor that cannot be resolved by injecting more money into a debt ridden system.

“Government debt looks more intractable, especially in light of the lacklustre growth and slide towards deflation that now seem entrenched. A recent analysis by Fitch, a rating agency, suggests that it will be very hard for any highly indebted euro-zone government to reduce its debt-to-GDP ratio by 20 percentage points over the next eight years, still less return it to its pre-crisis level. Governments need to run primary (ie, before interest payments) surpluses in order to pay off existing debt.”

No sane person believes that government debt will be reduced. The imaginary recovery only became a painful hardship for EU subjects. Not so for the elites who benefit from the single currency at the expense of their fellow taxpayers. This time around the circumstances may be different.

Even a publication like the Business Insider touts the Economists viewpoint in The Future Of The Euro Could See Trouble This Week.

“Indeed, the political risks to the euro may be greater now than they were at the height of the euro crisis in 2011-12. What was striking then was that large majorities of ordinary voters preferred to stick with the single currency despite the austerity imposed by the conditions of their bail-outs, because they feared that any alternative would be even more painful.”

The EURO currency has a permanent flaw that no amount of tweeting can correct. Europe has always been a hot bed of national differences. Utopian dreams of uniting dissimilar cultures and very divergent economies under the fig leaf of a political union have always been a formula for failure.

The German economy has emerged as the bankroll of last resort. Applying the same political pressure used throughout the post war era to bully the Federal Republic of Germany into paying a disguised version of reparations to sustain the EU is coming to an end.

Spiegel Online, the German publication provides an interesting article on Monetary Fallacy? – Deep Divisions Emerge over ECB Quantitative Easing Plans.

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