Eurozone's Rearranges Deckchairs on Titanic

by John M. Curtis
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Copyright November 12, 2011
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     Inside the inner sanctum of Frankfurt-based European Central Bank, a boiler-room containing public relations’ experts manufacturer stories about how the 1999 euro is supposed to survive Europe’s modern-day version of the Black Death or Bubonic Plague.  This time around the contagion is not bacteria but a failed experiment at a common currency designed to compete with the U.S. dollar.  Led by Germany and France, 15 other sovereign nations joined the euro, promising unprecedented economic prosperity.  Twelve years into the experiment, and some of Europe’s most stable economies, including Italy, Spain, Portugal, Ireland and Greece, teeter on bankruptcy, forcing Germany and France to bailout Eurozone’s failing economies.  Tossing out Italian Prime Minister Sylvio Berlusconi doesn’t change the euro’s fundamental flaw:  No common tax base.

            Euro’s are manufactured by the Germany-ECB headed by Jean-Claude Juncker, hoping to ward off a crisis that has led many respected economists to spell the end of the euro.  Insolvency in Athens was the tip of the iceberg dealing with ways to finance Greece’s mushrooming debt.  All 17 Eurozone countries rely on the ECB for the capital to fund formidable social welfare states, offering Eurozone members lavish social welfare benefits and early retirements.  While Greece has run out cash, so have numerous other Eurozone countries unable to pay for the costly social safety network separating Europe from the rest of the world.  Nowhere, including the U.S., do citizens have more economic and social benefits than Europe.  Since launching the euro in 1999, less industrialized countries have been unable to keep pace with the euro’s over-valuation, causing extreme cash-flow problems.  

            Greece, Spain, Portugal, Ireleand and now Italy have all run out of euros to pay the astronomical sums for state jobs, welfare benefits and pensioners.  Now out of cash,  Eurozone countries are forced to borrow more money at high interest from the ECB.  “The crisis in Europe remains the central challenge to global growth.  It is crucial that Europe move quickly to put in place a strong plan to restore financial stability,” said U.S. Treasury Secretary Timothy Geithner in Tokyo at an International Monetary Fund economic summit.  U.S. stock markets cheered the resignations of Greek Prime Minister George Papandreau and Italy’s Prime Minister Sylvio Berlusconi.  Replacing Papandreou with former ECB vice president Lucas Papademos or Berlusconi with former European Commissioner Mario Monti doesn’t change anything in the Eurozone other than changing the window dressing.

            So far the ECB has refused to buy back toxic foreign debt and instead has purchased unrepayable bonds.  ECB officials have lectured Europe’s failing economies to implement draconic austerity measures, punishing state workers and pensioners for a problem created by the Eurozone.  Without the euro, independent sovereign nations have the wherewithal to coin their own currencies to cover domestic and foreign debt obligations.  Borrowing or begging for more cash from the ECB doesn’t work to resolve sovereign nations’ debt problems.  All sovereign nations need their own central banks to print and inject enough currency into circulation to cover domestic and foreign debts.  Today’s arrangement with the ECB and common currency has caused Europe’s fiscal crisis.  IMF president Christine Lagarde warned that Europe’s financial crisis could spread around the globe.

            No one in Brussels or at the ECB in Frankfurt has admitted that the common currency has failed.  Throwing more cash into the European Financial Stability Fund  bailout bank doesn’t solve the basic problem:  That there’s no common tax base in the Eurozone.  Fund chief Klaus Ragling urged member states to increase the fund from 440 billion euros to 1 trillion euros.  “There’s real turbulence in the markets, real question marks over whether countries can deal with their debts and a big question mark over the future of the Eurozone,” said British Prime Minister David Cameron.  Cameron hates to say “he told you so,” but he opposed the euro from the get-go and vociferously opposed U.K. participation in 1999.  Russian Prime Minister Vladimir Putin, slated again for president next year, believes the ECB must aggressively intervene in Europe to avoid a complete financial “collapse.”  

            Shuffling around prime ministers and presidents won’t solve the Europe’s failed experiment with a common currency.  While German and France want to avoid the collapse of the euro, delaying the inevitable causes perpetual chaos in world stock markets trying to hedge their bets against the euro’s eventual demise.  “I personally doubt very much that adding two or three zeros to the bailout volume can solve the structureal and political problems,” said ECB poliymaker Jurgen Stark, opposed to Putin’s plan for ECB intervention.  Stark and others in the German Bundestag [parliament] oppose printing more euros and buying back toxic debt.  Whether it hurts the ECB or not, the Eurozone must face the music and end the failed experiment with a common currency.  Every sovereign nation needs its own central bank to print money and provide enough cash to meet its obligations.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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