Since its inception, critics of the eurozone have been pointing to its incomplete nature — everyone uses the same money but keeps their own national budgets and tax regimes — and speculating that this “fatal flaw” would doom the system. Other observers, however, gave the euro’s creators more (Machiavellian) credit and assumed the initial version was simply what was politically attainable at the time. Future leaders, they predicted, would wait for (or engineer) a crisis and then use it to bully their reluctant citizens into a centralized government.
This month the crisis erupted, with Greece closing its banks, imposing capital controls and briefly defaulting on its debt before finally giving up. And now come the calls for centralization:
France’s Hollande Proposes Creation of Euro-Zone Government
(Bloomberg) – French President Francois Hollande said that the 19 countries using the euro need their own government complete with a budget and parliament to cooperate better and overcome the Greek crisis.“Circumstances are leading us to accelerate,” Hollande said in an opinion piece published by the Journal du Dimanche on Sunday. “What threatens us is not too much Europe, but a lack of it.”
While the euro zone has a common currency, fiscal and economic policies remain mostly in the hands of each member state. European Central Bank President Mario Draghi made a plea this week for deeper cooperation between the euro members after political squabbles over Greece almost led to a rupture in the single currency.
Countries in favor of more integration should move ahead, forming an “avant-garde,” Hollande said.
“Europe has let its institutions weaken and the 28 European Union member countries are struggling to agree to move ahead,” Hollande said on Sunday in a text which was also a homage to his mentor Jacques Delors, a former European Commission President who proposed similar ideas.
Draghi called for the creation of a shared treasury within 10 years in a joint proposal with politicians including European Commission President Jean-Claude Juncker and Eurogroup President Jeroen Dijsselbloem last month.
If you assume that the plan all along was to engineer a crisis and use it to force integration, then the behavior of the Troika begins to make sense. Instead of resolving the first Greek crisis in 2011, they papered it over and used the resulting breathing room to move Greece’s debt off the balance sheets of the European commercial banks that would have been fatally wounded by a Greek default. Then, once the system was sufficiently insulated from Greek damage, they told Athens to go ahead and leave, knowing that whatever happened next would be non-fatal to the currency union but scary enough to make full integration palatable for a critical mass of Spaniards, French and Italians. Hollande’s trial balloon is designed to test this thesis.
Lots of problems remain, of course, mostly involving the differences between the big and little players. For, say, Portugal or Greece, a “shared treasury” basically means becoming German subjects and living according to the latter’s rules, which sends obvious shivers down many spines. For Germany and the one or two other dominant players, running such a central government means being fully responsible for the behavior of Italians, which they would obviously like to avoid.
Most scary of all for the Germans, an integrated Europe, with its aging population, massive levels of government spending and rapidly accumulating debt would need a weak currency to avoid stagnation. So either way — a continuation of euro 1.0 or the adoption of euro 2.0 — inflation at higher rates than Germany expects will be unavoidable. Based on their reaction to the Greek “resolution,” foreign exchange traders seem to be figuring this out.
14 thoughts on "Was Greece Always Part Of The Plan?"
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The Euro is being transformed into The New Deutschemark, and this has been Germany’s plan all along. They’ve always wanted to be The MasterMind Of Europe; they tried twice in the 20th Century, and that didn’t work out very well, so they got smart and in the 21st Century realised all they had to do was have a little patience and they’d get Europe without firing a shot this time. The Euro is dead! Long live The New Deutschemark.
Feel Free Freedom gollarcollaps ……… Keep Reading
I distinctly recall being informed 20 years ago by gleeful progressives that, the socially superior European Union was “going to bury the U.S.”. Now, not so much.
To be sure, we have our own very serious ‘doom’ to deal with that will haunt us for generations to come, but there’s clearly nothing ‘superior’ about the European model.
The scene from ‘300’ now seems quite fitting for Greece…
King Leonidas: … You threaten my people with slavery and death! Oh,
I’ve chosen my words carefully, Euro. Perhaps you should have done
the same!
Messenger: This is blasphemy! This is madness!
King Leonidas: Madness…?
King Leonidas: This is Sparta!
.
I recall reading some “architects” of the euro project saying that without both a monetary union and a fiscal (political) union the euro would fail, but their hope was that the inevitable crisis would make “heretofore” Europeans more amenable to a political/fiscal union. Unfortunately, Greek citizens didn’t get that memo in time for a “heads up”, so they succumbed. I’m not so sure the next most indebted (Portugal?, Spain?, Italy?) will be as duped. The EU authorities have shown their true colors and it is not what most Europeans thought they were agreeing to when they joined the euro zone.
There is speculation about how the US will handle “its” inevitable debt problems too, which I think will begin at individual city/state levels. I think of individual states within the US as being analogous to European countries within the EU. How US states will view bankrupt states, and vice versa, and how the Federal government interacts with them will be interesting to compare and contrast. The EU isn’t at the level of the US Federal government (yet) and I hope it never is, but I do think the EU authorities want that.
Holland is smoking some great Oregon shit if he thinks this will work.
Europe has not 21 countries, it is 1271 clans. It has never shaken off it’s fundamental parochial county system from the dark ages.
In a federal system such as the USA has that can work because our federal constitution has several mechanisms for assuring that mob rule at one end and aristocracy at the other cannot override the laws and rights of the individual. We have the Supreme Court which decides basically when the nation is ready in law for change. We have the equal protection clause that makes sure that NO CITIZEN is less than another citizen by accident of birth. And we have the full faith and credit clause that means laws in Washington state mean the same thing in Seattle as the laws in Florida do in Miami. Not that the states do not have very different ways of looking at life and running their territories, but no one state can put others at a great disadvantage such as Germany has done to the PIIGS.
And I am a citizen of Ireland as well as the USA so I have watched carefully over the years these actions. I can tell you flat out the Irish are prized in Frankfurt as the good kids, because they not only gave good head all the way to the end they swallowed and smiled after. I would never live in Ireland now. They used to have a 7% stamp duty (sales tax) on RE transactions that was financed into the mortgage, but once you bought it your land was never taxed again, there was no possibility of losing your land to taxes, something the Irish had learned through 800 years of British oppression when they could lose their land just on the word of a local lord who raised their taxes beyond their ability to pay, making them sharecroppers on their own property.
But now because Frankfurt demanded it they also have a annual property tax of 1.5%. They will find out again what it means to be slaves on their own land while foreign lords demand ever more money.
Oh and by the way, there is a huge continental shelf off the west coast of Ireland that is only in about 85-1500 feet of water more than twice the size of the whole island of Ireland that no other nation can make a claim to, it is HUGE in oil and gas reserves, by some estimates several times the size of the North Sea deposits. Bigger than Iraqi reserves. This is what Germany really wants. To steal the most prized jewel of the most beaten people on the planet.
A quick look at Wikipedia on Greek shipping shows why this is The Great Red Dragon’s Snakes In Suits latest attempts to control all of Europe.
https://en.wikipedia.org/wiki/Greek_shipping
“Today, shipping is one of the country’s most important industries. It accounts for 4.5% of GDP, employs about 160,000 people (4% of the workforce), and represents 1/3 of the country’s trade deficit.[2] The Greek Merchant Navy controls 16.2% of the world’s total merchant fleet, making it the largest in the world.”
Their goal is “to own the earth in fee-simple.” They’re certainly on their way.
Not if people call the bankers on their fraudulent schemes of lending unearned currency in exchange for real asset collateral.
It would certainly be wonderful if they did just that.
I really don’t like that Sometimes The Dragon Wins.
Oh to be one of the EU ‘parliament’ (ha ha — no one elects them!) members. Fat pay, special tax taxes, fat expense accounts, and near zero accountability. Who would not want to ‘rule Europe’ under such a scheme?
In fact the European Parliament IS elected.
Maybe you were thinking of the Commission or the Council ?