The Euro: tragedy to farce....and back!

The Euro crisis seems to go from tragedy to farce and back again in a single day. How to make sense of it all? The chattering classes have much to say but little of any value and almost nothing that enables us to understand the real issues.

The whole Euro project is fundamentally flawed. Brussels knew this at the time of its planning and launch. It opened with the ‘growth and stability’ pact. Who were the first to breach it? Why, the two countries that  put it in place to prevent  the Club Med from going on a spending spree with an artificially cheap currency. I speak of France and Germany, of course. So why did they do such an irresponsible and uncharacteristically reckless thing? Because it was all in the Master Plan that the Euro should get into difficulty, enabling the Franco-Teutonic Axis to push for political integration. A Europe run by France and Germany, with the remainder as client states of the Big Two – the EUSSR. Not since the Holy Roman Empire and Charlemagne has there been such a political union. It would be the summit of French and German foreign policy over 400 years that they had unsuccessfully tried to achieve through major wars.

What they had not bargained for was the Euro going tits-up quite so spectacularly.

The built-in flaws were that the Eurozone created a grouping of 17 members all with their own fiscal and economic policies. The EU has no common treasury, no taxation powers, no bonds and no proper central bank that can act as lender of last resort. If the Euro is to survive it must be given all those characteristics. The price to be paid is that individual member states will lose their own taxation powers, control over budgetary and economic policies, their central banks and borrowing powers, in addition to loss of the ability to fix interest rates which has led to the current crop of disasters.

And we have heard much about the crisis being caused by the profligacy of Ireland and the Club Med. Well, not quite.

First, Ireland and Spain roared into inflation with mad-cap expansion of property development on the back of cheap money which the home governments could not control because they have no power over interest rates.

And we hear a great deal about sovereign debt, personal debt, all kinds of debt, in fact. What we hear nothing about is saving. But in  a closed currency zone the simple arithmetic will tell you that when the economies within that zone are hopelessly out of balance, with widely differing levels of efficiency, production costs, wage-levels, cost of living and the rest the whole edifice will become out of kilter because if Germany is racking  up massive savings through its dominance of manufacturing industry and it huge export market the counter effect is debt on the part of the less efficient economies i.e. the Club Med. Savings on this scale suck the life-blood out of uncompetitive economies.

One size fits nobody. (And if Brussels believes that it can dragoon the ex-Communist counties into exchanging the Kremlin for the Berlaymont they are nuts!).

Add to this widespread corruption, poor revenue collection efficiency, weak leadership, snail’s pace decision-making inherent in getting agreement from  17 different governments – and here we are!

As ever, Europe’s leaders are falling back on the old stand-by. If all else fails, lie your way out of it!

Only days ago we were told that the Greeks could not leave the Eurozone because there was no legal mechanism for it. Ditto the EU. Now Merkozy tells us that if the Greeks don’t boss-up, they will be out of both!