Is the European Union doomed?

Discussion in 'Economics' started by jficquette, Jun 23, 2008.


    Has Europe's terminal crisis begun with a triple no vote?
    By Ambrose Evans-Pritchard
    Last Updated: 1:02am BST 24/06/2008

    The ultra-Europeans have overplayed their hand. We can now glimpse a chain of events that will halt, and reverse, this extremist push towards an Über-state that almost no one wants.

    The attempt to override the triple "No" votes of the French, Dutch, and Irish peoples has brought the EU to a systemic crisis of legitimacy. A line too many has been crossed. Any sentient citizen can see that the process has become unhinged.

    While "Europe" blunders on as if nothing has happened, it is now an open question whether the Lisbon Treaty - née Constitution - will ever come into force, whether the EU will ever acquire the machinery of an economic, diplomatic, and military power, and whether the euro will ever have a polity to back it up.

    For three decades - from Rome to the Single European Act in 1986 - there were no treaties. Then the pace quickened: Maastricht, Amsterdam, and before the ink had dried on Nice, the ideologues hatched the Constitution.

    This was the final throw of the Monnet Project: an attempt to lock in the framework of a proto-state, crowned by a supreme court with overweening jurisdiction, before the ex-captive nations of eastern Europe joined and rendered such ambitions impossible. The deadline slipped.

    The failure of this gambit became clear this weekend when the Czechs and Poles refused to mug Ireland; or put another way, when they insisted on upholding the Vienna Convention on the Law of Treaties, unlike our own craven government.

    "The treaty is dead," said Czech president Vaclav Havel. "To pretend something else is undignified - if we live in a world where one plus one equals two."

    It is fitting that the central Europeans should emerge as the champions of due process. Their own memories of Soviet methods are fresh.

    Radek Sikorski, the Polish foreign minister, cut his teeth as a journalist with Afghan guerrillas fighting Soviet forces in the Hindu Kush. Whatever the Irish decide to do, he said, "we'll respect it". How refreshing.

    It was France's Nicolas Sarkozy who set off this debacle, sweeping aside the verdict of his own electorate to revive a rejected text. He aimed to score points as Europe's mover and shaker: instead, he charged into the complexities of EU politics with his trademark flippancy.

    Well might Mr Sarkozy rail at the Irish. "Bloody fools. They've been stuffing their faces at Europe's expense for and now they dump us in the s***," he yelled.

    Mr Sarkozy still thinks that Ireland can be made to vote again in a few months. Who is the bloody fool?

    Yes, the Irish voted twice on Nice. That was another world. The Nice "No" came below radar, on a tiny turnout, after scant debate.

    This time the contest has been electric. The Irish were warned day after day that rejecting Lisbon would be catastrophic. They rejected it any way, by national instinct, unwilling to sign a blank political cheque.

    As premier Brian Cowen now admits, Ireland's swing from boom to bust played its part in the vote. "That overall economic landscape is not likely to improve in the short term," he said. Quite.

    A property bubble - caused by EMU interest rates of 2pc until 2005 - has left Ireland with frightening household debt of 176pc of gross domestic product. The country now faces a quadruple shock: a credit crunch, rising interest rates in Frankfurt, a plunge in sterling and the dollar, and a sharp slowdown in its Anglo-Saxon export markets.

    Italy is not happy either, judging by prime minister Silvio Berlusconi's latest tantrum. "The euro is hyper-valued and it is crippling our exports. Europa is culpable for not intervening," he said, launching into a stream of invective against the EU.

    The fast-moving events of the past two weeks must have market consequences.

    Note that German foreign minister Frank Walter Steinmeier said Ireland should "exit" the EU temporarily. Did he forget that Ireland is an integral part of monetary union?

    His reflex is not only unpleasant, it also reveals that Germany views peripheral members of the eurozone as dispensable. It is an invitation for hedge funds to "short" EMU bonds from Club Med states.

    Can one still presume that Germany will do whatever it takes to shore up EMU in a crisis, if only to safeguard its half-century investment in Europe's new order? Clearly, the euro break-up risk has been hugely mispriced.

    The survival of EMU does not depend on Lisbon as such, although the failure of the treaty would make it harder for the EU to orchestrate a covert bail out.

    But there is a deeper issue at stake. As the Bundesbank warned long ago, EMU will eventually buckle under strain over time without the cement of political union. This means a de facto EU treasury, a unified wage system, and the plausible prospect of a debt and pensions pool. None of this exists. Nor will it.

    The ideologues ignored the warning. Indeed, they saw EMU as the great catalyst, forcing the pace of Europe's integration. This fuite en avant has proved a grave miscalculation. It forgot about the voters.

    The elites will now have to face the great euro storm of 2008 to 2009 with the limited tools they have, bridging the economic chasm between north and south as best they can. Good luck. Viel Glück.
  2. Cesko


    Can one still presume that Germany will do whatever it takes to shore up EMU in a crisis, if only to safeguard its half-century investment in Europe's new order? Clearly, the euro break-up risk has been hugely mispriced.

    Regular house in my home town (100 miles East of Prague), town of just 10,000 people(?!) costs $250,000. I am clueless but I just know something in Europe is seriously out of balance.
  3. Div_Arb


    They need another world war to get things going over there.. That's what has kept Europe steaming ahead for the past 1000 years. Perhaps invade Turkey or something.
  4. invade France and they can be home the next day..not a shot need to be fired
  5. nevadan



    For a good look inside the shaky EU see if you can get a copy of Bernard Connelly's book The Rotten Heart of Europe: The dirty war for Europe's money. He was a state economist for the British government and was privy to many of the key players and events leading up to the EU. For his efforts he was sacked and dragged through the legal system and his book effectively banned.
    You will have to get your copy used since it is verboten. Some of the economics in the book are a little work to get through, but other parts of it that deal with the personalities involved read like a novel.
  6. That is what scares me about Europe. Their is nothing in there system to prevent another Hitler to come on the scene.
  7. Please. The US administration enjoys playing the role of World Cop(tm) too much to allow that in the near future, especially with those sexy new F-22s rolling off the assembly lines.
  8. get serious.

    The entire region is a pacifist mess.Tthey won't even pay for their own defense in many countries. Europe won't be starting any wars anytime soon. They tend to do just the opposite and hold the US back in the UN as far as war is concerned.

    I am a Yank, but I think this is a good thing. I don't want anymore US wars in my lifetime. Bomb the crap out of someone, or use up our aging Tomahawk inventory if we have to, but no more "wars" unless we, or our allies are directly threatened. As in attacked.

    Back to the topic. I am surprised the euro has lasted this long. Giving up control of your monetary tools to keep an economy chugging along is just asking for trouble. Either Spain, Italy, or Greece will bail in the next European downturn I bet. Rates are always too low for these guys.
  9. Errr...

    rates are always too HIGH for these guys.

  10. Germany was pacifist when Hitler came to power. Currently pacifist countries with a history of war and agression are the ones that have the most risk.

    The Europeans (save England) have no backbone and their socialist system is built on a house of cards.
    #10     Jun 24, 2008