First financial, then economic, finally political. The smaller countries will be followed by the larger. In one of his op-eds, Ambrose Evans-Pritchard writes an overview of Europe in which he opines that the outer rim: the post-communist states and Club Med are entering a 30s style depression due to the unwillingness of the European Commission or Central Bank to alleviate their woes.
Romania, Bulgaria and the Baltic States are now facing a ‘spring of discontent’ as austerity measures result in rioting and instability. Evans-Pritchard has noted that the European institutions are compunding the problem:
Leaked documents reveal – despite a blizzard of lies by EU and Latvian officials – that the International Monetary Fund called for devaluation as part of a €7.5bn joint rescue for Latvia. Such adjustments are crucial in IMF deals. They allow countries to claw their way back to health without suffering perma-slump.
This was blocked by Brussels – purportedly because mortgage debt in euros and Swiss francs precluded that option. IMF documents dispute this. A society is being sacrificed on the altar of the EMU project.
The political consequences of the credit crunch are coming to the fore in the fragile periphery of the European Union: how long before we begin to see the political expression of this discontent respond to the monopoly of the European class, a challenge that will arise outside the mainstream from the extremes.
This could be the moment for Britain to break away! If you set the example, the smaller countries would also secede! The EU doesn’t have a separate army, so can’t invade anywhere.
Go for it!
What about the benefits (if there are any) of the EMU?
Ten days ago I made a “bold prediction” that one Eurozone country would leave the currency block during 2009. Reading that link makes me even surer that I’m right
It’s quite clear that the EU rapid reaction force (French and German army) will have to be deployed to restore order on the streets of some of the EU’s peripheral states. No different really from the Soviets entering Hungary during the 1956 uprising. Peace must be restored.
Quite possible Ireland will be the first to leave the Euro, but more interesting to see what happens to the countries locked into ERM’s scheduled to join.
Of course just to prove out of step with the real world it is, the LSE comes out with this…..
http://www.lse.ac.uk/collections/pressAndInformationOffice/newsAndEvents/archives/2009/BritainandtheEuro.htm
I’m all for the break up of EMU and the EU itself, but reading this
in the FT, that this crisis could be used for fiscal union rather than just momentary union. Yes I know the FT’s predilections are corporatist – big government/business), but to me that makes the idea more disconcerting but unsurprising.
It’s true that fiscal union may be the only way out for the Euro zone, but won’t that hasten the demise of the EU when people really twig that their democracy is a complete sham?
I would hope so Mark, but if the bovine character of the UK populous is replicated on the continent I would fear it might not.
A E-P believes in the fallacy of expanding the money supply (expanding credit, loose money – call it what you will). And this doctrine is false.
As for Latvia – it should not rig the exchange rate of its currency (to the Euro or anything else) – but it should not get a loan either.
If the Latvian government can not pay for its spending it must spend less – period.
Of course the people who believe in “fiscal transfers” in the E.U. area also believe in an “expansionary fiscal policy” (i.e. lots of govenment spending) and believe in an “expansionary monetary policy” (lots more credit money).
Their ideas are false.
As for which Euro nations will collapse first – Spain? Portugal?
But it will not be the Euro that causes the collapse.
It will be high government spending – and lots of very bad regulations.