- From inception, Eurozone monetary union was an idea doomed
to fail. Nonetheless, it was engineered fraudulently to look workable.
- In 1979, Europe's Exchange Rate Mechanism (ERM) was introduced
as part of the European Monetary System (EMS) to propel the continent to
one European currency unit (ECU).
- ERM never worked. ECU is failing. At issue is duplicity,
conflicts of interest, and uniting 17 dissimilar countries under rigid
euro straightjacket rules. Doing so usurps their monetary and fiscal autonomy
- Nonetheless, banking giants partnered with EU, ECB and
IMF Troika power decide everything. Policies require lowering living standards,
sacking public workers, and selling off state assets lock, stock and barrel
at fire sale prices.
- Today, the euro corpse only awaits its obituary to be
written. Successive bailouts and fixes haven't worked. Troubled Eurozone
economies are drowning in debt. Adding more makes bad conditions worse.
- So do forced austerity measures, layoffs, and higher
working household taxes. Lost purchasing power means less spending, fewer
jobs, and greater public anger than today's high levels.
- Nonetheless, Germany and France pressured other EU members
(except Britain) closer to economic collapse. Sweden, the Czech Republic
and Hungary said their parliaments would decide whether or not to agree.
Nonetheless, they went along.
- Germany's Chancellor Angela Merkel said:
- "It's interesting to note that 20 years" to
the day after the Maastricht Treaty was drafted, "we have succeeded
in creating a more stable foundation for (its) economic and monetary union,
and in so doing we've attended to weaknesses that were included in the
- "I'm very happy with the result," she stressed.
Germany becomes an arrogant domineering leader. Britain refused to go along.
A new treaty will be drafted. Merkel wants it done by March 2012.
- However, it won't be a treaty. On December 13, 2007,
the Lisbon Treaty amended Masstricht. EU member unanimity was required
to consummate it. The same requirement holds for changes.
- All member states must agree. Constitutional changes
may be required. In some cases, referendum approval may be needed. Internal
divisions could take years to resolve.
- At issue is imposing budgetary discipline on member states.
Violators face sanctions. The European Court of Justice will have final
say over national budgets. Short-term measures to prevent contagion are
- An alternative is two pacts - one for 17 Eurozone countries
with restrictions, and a second for the other 10 EU members without them.
- Hours before the Brussels summit, French President Nocolas
Sarkozy said, "Europe has never been in so much danger....An agreement....is
crucial." Otherwise there's a "risk that Europe will explode."
- Britain opted out. At issue are new regulatory proposals
UK banks oppose. They include an EU-wide financial transactions tax, bans
on short-selling, and requirement that all financial business be conducted
in the Eurozone, not London.
- At the same time, a provision protects banks and bondholders
from losses incurred by bailouts. Worker households will bear the burden.
- Other differences remain to be resolved, including between
Germany and France. Sarkozy wants less stringent fiscal oversight and more
expansive ECB policies. Merkel wants more centralized control, enforced
EU austerity, and tighter ECB reigns imposed.
- Without Britain, whatever's agreed will be illegal under
Lisbon. The December 9 deal solves nothing. Switzerland is preparing for
a euro collapse. Capital controls and negative interest rates may be imposed
- A tsunami of euros would inflate the Swiss franc, devastate
its export economy, and devalue its overseas wealth. The price for troubled
Eurozone countries is economic collapse. It's just a matter of when.
- At the same time, the agreement requires 26 EU nations
to surrender their monetary and fiscal powers to Brussels. Violators will
be punished. Political, economic and legal issues impose immense burdens
- In addition, final details aren't yet worked out. Another
summit will follow next year. Europe and America face worsening Depression-level
problems. China, India, Brazil and other emerging economies are slowing.
A global train wreck approaches.
- Recent economic data show why. In November, French business
confidence fell for the eighth consecutive month. In October, Japanese
machinery orders dropped 6.9%, following an 8.2% plunge in September.
- South Africa just reported a 5.6% drop in manufacturing
activity. Britain recorded a 0.7% decline. China's October exports fell
1.7% after dropping 3.8% in September.
- Korea's exports are down three consecutive months. Singapore's
were off in September and October. Indonesia's plunged 8.5% in October
after slipping 2% in September. India's imploded 18.3% after being flat
- Commodity markets also are being hammered. Copper was
down almost 5% in September and 20% in 2011. Since June, aluminum is off
25%. European refinery margins dropped 30% this year.
- Representing about 20% of global GDP, Europe is the world's
largest economic unit. It accounts for 25% of global oil and nickel consumption,
and nearly 20% of other commodities like copper. As it goes, so do countries
everywhere, and it's heading south.
- Longer-term realities will throw cold water on duct tape
solutions. Italy must refinance almost 20% of its sovereign debt (400 billion
euros) next year at interest rates punitive enough to push it over the
edge. Economic weakness is spreading globally.
- In 2012, Spain has to refinance 150 billion euros. Its
fate may be similar, especially given spreading global economic weakness.
Comments from the Reserve Bank of New Zealand echoed other central bank
- "Tightness in international markets means funding
costs for New Zealand banks will increase to some degree over the coming
year." Global uncertainty signals "risk(s) that conditions (will)
- The Reserve Bank of Australia was just as glum, saying:
- "Financing conditions have become much more difficult,
especially in Europe." It suggests "further material slowing
in global growth has increased."
- The Bank of Canada concurred, saying:
- "Conditions in the international financial system
have deteriorated significantly since" June 2011, "owing to three
- "sharp(ly) escalat(ed)" Eurozone sovereign
debt crisis conditions;
- "a much weaker outlook for global economic growth;"
- far less risk-taking globally.
- As a result, conditions are expected to remain weak,
uneven, and uncertain. Contagion's also at issue. Core Europe is affected.
French and German economies look much weaker. In fact, Germany's banking
sector is in much worse shape than earlier thought.
- Progressive Radio News Hour regular Bob Chapman says
six troubled Eurozone countries can't compete "and more may follow."
Debt levels keep rising. "This was known and evident from the very
beginning, but the experiment went ahead anyway."
- Bankers, politicians and bureaucrats want world government.
Competitive nations want profits. It took a decade to destroy the infrastructure
of weak economies. The euro's "on its way out - another failed experiment."
- If stronger countries opt out, "governments, banks,
insurance companies and pension plans would very well be wiped out by the
- Moreover, Eurozone disintegration will take America,
Britain and global economies with it. Twelve years ago, Chapman predicted
it. It's now a reality, he says. He sees stopgap measures delaying its
- "History tells us involuntary acceptance of profligate
credit expansion and unpayable debt leads to total catastrophe for the
entire financial system."
- Troubled Eurozone economies need $6 trillion to avoid
collapse. Whatever they get won't offset needing more help down the road.
- Moreover, Friday's "grand bargain" achieved
nothing. ECB monetary policy won't be expansive. Britain and many EU countries
won't follow budget deficit restrictions. All of them have poor track records
- Greater trouble lies ahead. Bailouts and agreements beget
new ones. Final resolution only is delayed. Contagion spreads Eurozone
- The longer crisis conditions persist, the worse they'll
be when day of reckoning time arrives. It's just a matter of time.
- Stephen Lendman lives in Chicago and can be reached at
- Also visit his blog site at sjlendman.blogspot.com and
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