Archive for May, 2012

German Power:The Price for the Euro?

Sunday, May 20th, 2012

There are only two ways that the euro can go forward without risk of disintegration. The first is political. The second economic. Both are linked.

The reality is that in any economic structure, the most powerful segment dominates. Germany is the biggest, richest and most competitive economy in the eurozone. The German people have, over the last hundred years, gone through hell and back to get there, on the way being gripped in the Nazi era with a collective insanity. More recently they had to suffer severe economic pressures from re-unification and reorienting their economy for the challenge of globalisation.They did this. They are now successful, with the most stable democracy and most successful economy in their history. The German economy is now the foundation of the German state. It has replaced the military tradition as the guardian of national security. Its virtues are thrift, moderation and hard work.

German voters will never support the idea that a large part of their accumulated wealth (their security) be used to pay the bills of those who spend above their means, work short hours, retire in middle age on full pay and expect to grow rich by simply buying a house. They will not prop up governments who bribe their voters with living standards founded on the never never, using money borrowed cheaply because of German credit worthiness. They will pay, but only if those countries in need, do it their way.

Thus it is a fact, from which there can be no escape, that if a country supports the euro and wants to be in it, it will have to accept the surrender of its economic sovereignty to German direction. The euro was conceived as a means of hobbling the power of a united Germany, but was given birth without the necessary democratic structure to control it. The outcome is that its control is in the hands of the strongest economy and German power in Europe is now absolute. The message is fall in line if you want our money.

Given that the voters of southern Europe will never elect  governments with a mandate to submit to the kind financial discipline inherent in the psyche of the north, there is only one other solution which will work. This is that Germany herself leaves the euro and returns to the mark. This would leave the indebted countries dominating the common currency which would promptly devalue by about 60%. Their debts would become manageable, their economies competitive and they would start to grow. German banks would take a haircut but their people might think it a price worth paying to rid themselves of the problems of the southern profligate for good. France would become leader, with Italy as deputy, of euroland and their economies would take off.

If neither of these solutions finds favour, the irrational faith in fudges and firewalls, declarations and summits, which are all that is on the crisis menu at present, will do nothing to halt, though it may delay but not now for long, the inevitable crash to smithereens of the euro. The end was written in a beginning which failed  to understand the fundamentals for establishing a successful currency. The democratic majority, if it ever existed, to set up such fundamentals has now gone, broken by unmanageable debt and unbearable cut backs. People are hungry. Some are near starving. Time has run out.

Euro: Can It Survive?

Saturday, May 19th, 2012

No, it cannot survive in its present dysfunctional form. This flawed currency is now assailed on two fronts. The first is financial. Countries using it are completely out of step fiscally with each other, Germany has scooped up all the cash to become the China of Europe and several  countries and their banks are technically bust.

The second problem is actually worse than the first. It is political. The absences of a single finance ministry to run the economy of Europe as a single entity, a central bank empowered to manage the currency with all the tools, including the ability to print money, and the failure to establish  a democratic process by which this is all organised and approved by voters, now combine to doom the whole project.

Not only do we now have huge financial pressures building, but the people are now beginning not just to riot, but to vote. The Dutch government has fallen, the French have elected a President seeking the opposite of what his predecessor agreed to, Greece has become ungovernable, Ireland is soon to vote in a referendum to ratify the Fiscal Pact  and may well sink it by voting No. Markets now look askance at Spain, Portugal and Italy as the flames of disaster grow ever closer. Spain is so close to the heat it is beginning to smoke. So, do we find the leaders of this currency union acting with decision and effect? No! They dither and argue because they know they have no mandate to do what has do be done and if they sought one it would be denied.

Now or very soon the reality will have to be faced. Currency union, political union and fiscal union are not a la carte choices. They go together as a whole package; you cannot have one or two, it is all or nothing. The voters of Europe will never agree to this so it cannot happen. What must happen now is to work out a plan to exit Greece, Ireland, Spain and Portugal from the euro by an orderly means and write off much off their debt. None of them has prospered under the single currency; the good times were all an illusion. This leaves France and Germany, the Benelux countries and the rest. What happens here will depend on whether a kind of Franco-Germany is politically possible. If it is then the others can decide whether they wish to be part of it, or go it alone.

This is a tough message, but it is now time to get real. It is time to plan for the inevitable and to stop dreaming of the impossible. Failure to do so will lead to meltdown.

Murdoch: A Tory Trap

Wednesday, May 2nd, 2012

The report of the Culture  Committee has been pretty damning about the quality of the leadership and management of News Corp and News International, as well as its ability to be truthful. Whether it was wise to add the fit and proper person bit about Rupert Murdoch himself is a matter of heated argument.

Certainly the resultant split giving the report majority, rather than unanimous, status, does not, as the Tories are claiming, rob the report of its authority. A majority verdict by three to two judges is no less valid, whether in a court of law, or in the award of a prize. Laws passed by a parliamentary majority are not less enforceable than those which go through unopposed.

Maybe Tom Watson did go a bit over the top. Maybe the report would have been better without that line. Nevertheless he has done more than anyone to bring this whole sorry affair to light and the Tories on the committee would have been wiser  to back him rather than Murdoch.

Because to the extent the public cares and it cares about other stuff a good deal more, that is how it will look. The Tories backing their friend. Moreover, while the split was on party lines, significantly not as in government against opposition. Here the Lib Dem went with Labour. The Tories were on their own.

Coming on top of claims by the Home office that immigration queues were exaggerated (until Cameron blew his top), Hunt and all the other bits of the ever growing omni-shambles (what a good word!), this will project as yet another example of the increasingly unpopular Tory party being out of touch with the public mood, while they cavort with their wealthy and influential friends. Add to that, increasing uncertainty about the success of their economic policy to the extreme extent that more and more people think Ed Balls, no less, is talking sense, and you have a gathering electoral disaster.

Only Boris seems to know what he is doing.