After a small break – some well-overdue pontificating on the EU, on my part. I hesitate to fully agree to Daniel’s assertion that the EU is dead. In fact, I would say, on the specifities of the crisis, exactly the opposite – the Euro will likely collapse, and the future of the EU is wobbly, at best. However, I am struggling to find any positive outlooks on the EU’s future, following on from Friday’s abject failure of a summit.
Most commentators point out that the crisis is well past manageable levels from individual countries, and that the future now rests on the shoulder of the ECB and Mario Draghi. Reuters’ Felix Salmon has perhaps been the most damning of all, writing of Draghi: “He’s very reluctant to lend it directly, he won’t lend it to the EFSF, and he won’t lend it to the IMF. Draghi has his instructions, and he’s sticking to them — even if doing so means the end of the euro zone as we know it.”
Independent economic adviser to European Commission, Philippe Legrain, agrees: “Only the ECB has the unlimited wherewithal to save Europe from the abyss now… But the longer the ECB delays, the greater the hit to people’s jobs and savings, the deeper the enduring damage to investors’ confidence in the eurozone financial system, and the bigger the risk of a catastrophic mishap. The time to act is now.”
And Frances Coppola writes under the heading ‘Nightfall in Euroland‘ that the proposed changes would not create a fiscal union anyway, and that it doesn’t address the problems that the Eurozone faces. “The financial sector is calling for a ‘big bazooka’ to backstop sovereign debt and stem the capital flight. It didn’t get one from this summit, so the European financial system will continue to haemorrhage money. Eventually it will bleed to death, and there will be massive banking failure that will make the 2008 crisis look like a minor blip.”
The sum of these pieces is, in my mind, a spot-on assessment of the situation. Perhaps I have unwittingly been reading spectacularly pessimistic opinion pieces on the Euro crisis (would be interested to see any positive ones!) but as it currently stands, until or unless the ECB/Draghi agree to step in and save the Euro, we seem to be looking at a chaotic beginning to 2012.
Some commentators have been discussing, ‘what next?’ – Luke Bozier suggests that the UK will leave the Union (as it is no longer in Britain’s interests to be in it), and that the best bet is for Britain to look at joining trading agreements elsewhere. I find this view fairly faultless – why have all your eggs in one basket when it comes to trade? Why has Britain been so reliant on Europe for trading when there are developing countries that have more opportunities for us?
It is also interesting to note that there are rumours that Germany has been printing Deutsche Marks. If true, this is a damning indictment of the Euro from the very country that has benefitted from it. According to ArabianMoney, Greece is due to pay its next debt instalment on the 17th – in four days. We’ll see what happens.
I have, perhaps unwisely, bet someone that the Euro will collapse by February 14th. Wonder if the bookies are taking bets on the collapse of the EU?