With imminent election of Hollande in France (unless he attacks members of the public, he will be the next President of France) and his plan to reopen the Fiscal Treaty – the EU is warming to the idea of growth and spending. As the markets rightly point out, Europe has no money. Absolutely none. Greece, Spain and Portugal are bankrupt – and Italy is not far off.
The European Union is unable to bail these countries out and the Central Bank is against Eurobonds (Germany objects); this has created massive tensions due to Europeans resorting to democracy-which the EU doesn’t like-to elect parties and politicians, who disagree with Germany.
So the French will like to try a little of bit of socialism to fix the crisis; spend some money and increase the debts, to obtain growth. The problem is stimulus spending eventually runs out and the fiscal reduction becomes even more painful; majority of European countries are unable to pass much needed reforms due to political unwillingness and are surprised that our economies are unproductive. Most of us lack the capacity to spend.
Spending, taxing the wealth creators and employing vast amounts of public sectors will not solve the crisis; it will make it much worse. Governments nationalising the banks, and effectively running them, is the quickest way of creating chaos in the financial markets. The problem is the currency, the Euro, not the policies or actions of governments; but there is no political appetite or will reduce the size of the Eurozone membership. Hollande’s plea for a sprinkle of socialism is the final throw of the dice and, in all honesty, will not work.
France and Spain are the only countries, whose populations are sceptical towards free markets, and will succumb to extreme opposition within the European Union. Most notably Britain and Germany. Both the Fiscal Treaty and Hollande’s Plan B are dead, along with the Euro and the European Union.
We might flirt with socialism for a few months, but the death warrant has been signed.