Wednesday, February 10, 2010
Death Knell for United Europe
Tomorrow's meeting and subsequent announcement of various rescue measures put forth to stabilize Greece and the rest of the troubled peripheral countries marks the beginning of the end for the Euro experiment.
A joint announcement by France and Germany (who will probably be the only members left of a "United Europe" in a decade or so), always the flagships of the EU project, will see gradual resentment against their largesse for less niggardly members.
Attempting to erase 2000 years of European history with a unified centrally controlled economic and political alliance was doomed to fail from the start. The cultural "rights" guaranteed by central (mostly protestant) government is interpreted much differently by the catholic countries. Sovereignity has different meanings as well.
And now, there is a precedent set for rescue, which is very dangerous as the EU's debt to GDP ratio will not change. As I have said, this opens up dangerous liquidity risk issues as well in an analogous fashion to U.S. states (who have much, much less debt ratios). This is simply a wager to buy time in order for the Global Economy to return to previous growth levels. But it is just these types of reflexive events that create vicious cycles, and the overwhelming probability is that the EU will dissolve within a decade.
It will be very interesting to see the political fallout from this and just how far the citizens of the core continue to allow such subsidization without a corresponding benefit.