What Next For Europe

The euro crisis is in a critical state yet again as Spain's banks are losing more and more money and the country's debts get reduced to near junk status. There is an urgent need for some billions of euros to keep them afloat. David Cameron is urging leaders in the zone to get something sorted. Now Angela Merkel is talking of closer political and financial union. This is what all the Euro fanatics have always wanted and which the populace of every country in Europe certainly does not want. What the proposal will means in the present circumstances, I know not. It may just be another mountain of fudge. What seems to be the case is that this scheme will be imposed on the countries of Southern Europe by the Germans and the bureaucrats of Brussels. Somehow, they will have to cobble this together in some way that will allow them to do it without having to ask the permission of any electorates in any country of Europe. Already we have Greece and Italy ruled by imposed bureaucrats sympathetic to the euro and now we will see something similar for all other countries that do not fall into line. In the 1920s and 1930s we saw the development of fascist dictatorships grow across Europe and if we are not careful, something similar will happen again. Now, we are to have dictatorship of eurocrats. At every permitted election, countries will vote for more and more extreme nationalist parties that will rid them of the impositions of Brussels. And they will be quite right to do so even if the final outcome will be unpredictable. The politicians and their cohorts in Brussels cannot solve today's problems because they will not acknowledge the cause of the problems. That cause is the euro. The euro needs to go and every country revert to each of their own independent currencies. It will now be difficult to unravel the mess because the debts across Europe have been allowed to become so enormous. But the euro must go. If Greece finally dumps the euro they will have at least a 30% devaluation, which will make their exports cheap and will make the country attractive again to foreign holidaymakers across Europe. They have already written off 50% of the debt. They will have to do the same to the other half — one way or another. These actions will create jobs, will stimulate growth and over a period of say 5 years they will get Greece back on its feet. They still need to eliminate corruption, make pension age something realistic and ensure that everybody pays their taxes.

Spain is in a more difficult situation but they need a similar solution. They need to get people back to work and start the economy growing. Their problem is the magnitude of bank debts associated with over-lending on housing. Somehow, whatever happens, the banks will have to be bailed out and some more of the debts written off.

During the next few days there will be more discussion in Europe but whether the politicians will sort things seems little more than an outside chance still. And it would be helpful if Christine Legarde of the IMF could refrain from making comments about the Greeks not paying their taxes. She is very highly paid and yet pays very little tax to anybody. We are all in this together, I believe.

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