The Bewilderness

Politicians: prepare to be grilled and pitchforked

Without using such volatile terms as "Endgame" (which will be a political rather than an economic play), are we nearing another phase transition, an acceleration of identified dangers? Ambrose Evans Pritchard charts the gradual tightening within the Eurozone as the European Central Bank does little to counter the reduction in inflation. 

If deflation is triggered through an exogenous shock then the political fractures may widen visibly and with rapid consequences. Polticians may be pitchforked in more than one Member State. 

 

Again, Europe doesn't win the pools

The Member States of the European Union, after a messy compromise, managed to agree a banking union. This hotchpotch has been roundly criticised for its inability to achieve its primary goal: avoiding the collapse of banks.

Instead of creating the stated goal of pooling the rescue, the finance ministers have diluted the national responsibility for saving banks by forcing other stakeholders and depositors to pay too. Thus, uncertainty and fear for investors is increased by a complex system that regulates banks at a supranational level and forces national authorities to undertake the rescue. Is that not similar to having a unified central bank and leaving national authorities responsible for dealing with monetary decisions over which they have no control. That worked well!

This system faces a further hurdle. The European Parliament is unlikely to pass the union in its present form. They would wish to see rescues undertaken by the Commission reducing the role of the Member States. A statement of "provide the money and we will take care of the rest". The whole system may yet founder on this rock.

For why are the states unwilling to pool their rescues? Are they aware of the debt lurking within their banks? Perhaps they are unwilling to share the bad debt with the good. Remember, unless you are Greece or Cyprus, there is always someone worse off than yourself.

Central bankers: the mad scientists of money

Now we know the extent of the Carneyval: the new spectacle centred in the City that decides to experiment with an advanced industrial economy. Or in central bank plagiarism: copy the Fed! Prudentia rejected, morality inverted; as these know it all neanderthals drag us back to the Stone Age.

Dress them up in glam and we would have a rock band. No offence intended for Queens of the Stone Age 

Economics will not decide this referendum

Walker's World at UPI decides to take a high-level view of a question which he argues could dominate the European crisis: Grexit vs. Brexit. Taking aside the question of political surprises in the present day, why does Brexit attract such interest? The short-term demands of Tory Eurosceptics may be swept away at the next election. It is unclear that a different government would observe a refendum promise or even adhere to the referendum lock. 

Walker's emphasis on the narrow economism that characterises Europhilia demonstrates that the primacy of politics remains the key driver for these events. Economics is a backstop but an EU, unwilling to reform, will not provide Cameron with what he desires for support.

Barroso Cake

When Jose Barroso set out his stall for further treaty changes at the European level, he used the phrase "political science fiction" to describe the potential recommendation that the Commission would champion. Avoiding the open and tedious door of satire, I do wonder if Barroso's words were chosen with an understanding of the term. Science fiction is a genre that embodies rationality, problem solving and futurist solutions as part of its suite. 

All of these virtues are embodied within the self-fashioned identity of the Eurocracy. Later on, Barroso appealed for democratic changes that would counter Eurosceptic and Europhobic parties through rational argument and "unwavering convictions". It is these small admissions that tease out the fundamental and irrational contradictions underlying these statements of 'cake and eat it'. Rhetorical homage to democratic outcomes and parliamentary debates are undermined by this teleology of development towards a European unity. If you vote the right way, welcome to Enlightenment and reason! If you vote the wrong way, you belong to an irrational and populist horde of darkness.

Perhaps Jose Barroso was unwittingly remembering some famous dystopias and how some were achieved by the stupidity of elites.

One day they will regret the long grass

The Draghi put may come to be seen as a short-term delaying tactic that destroyed any potential for implementing a deeper political and economic union. A deluge of money reduced the pressure on Italy and Spain removing the need for a coordinated bailout. Proposals for a banking union and greater political unity lost any immediacy and, as Euractiv have reported, are now pushed forward till next year. The drive for ever closer union has also become entagled with the electoral cycle of the paymaster, Germany: due to take effect in September this year. Angela Markel is not allowing European issues to affect the election since Eurosceptic parties are already outflanking the Christian Democrats and the Free Democrats on this single issue. 

But political expediency, in its own terms, is not news. Angela Markel agreed with Francois Hollande, at a summit meeting on the 29th May, that these issues would be negotiated and agreed upon after the European elections in May 2014. That is a delay of a year, probably eighteen months. This is where the issue of the slow burn may find them out.

The Economist cover for last week described the political leaders of the Eurozone as sleepwalkers. The urgency of the markets has been replaced by the apathy of stagnation. The problems have been institutionalised with an economic desert in southern Europe. This leaves the ingredients for further emergencies and bail-outs in place; spreading to other candidates within the currency union such as France and the Netherlands. The balm of press releases will not delay or prevent this crisis. The continual decline in economic activity and rise in unemployment cuts across the nonsense spouted by Eurocrats and renders the continent vulnerable to global crisis.

The Europeans will regret that they did not act whilst they had an opportunity to do so. Pain postponed is crisis redoubled.

A depressed, depopulated desert: the southern €zone?

I attended a lecture and book luanch this evening by Gavin Hewitt, BBC Editor for Europe, who has taken time oit to write a tome of contemporary history on the elite proceedings during the current crisis of the €. Hewitt set the stage with some thoughts on the emasculation of leaders, the gradual growth of fears over unemployment and the erosion of an adherence to austerity. 

Hewitt was honest in navigating between positions and showing how some criticisms are shared by both Europhiles and Eurosceptics. The problem is that their answers are different.

Yet, the talk omitted demographics. The depressed Mediterranean is suffering from a declining population with birthrates nowhere near replacement level. A crisis of economic growth was due to hit at some point. Yet, the crisis may have brought the effects of the demographic trap forward by encouraging emigration and creating a structural problem of youth unemployment. This would have crept up on the countries sometime within the next decade. Now that demographic death rattle can be heard within the Eurozone as a depressed depopulated desert becomes one outcome.  

No negotiation says Rompuy

Van Rompuy is the latest EU personage to make a statement about the theoretical 'Brexit'. Again, the line has been adopted: the treaties are not up for amendment and an 'a la carte' menu is not allowed. To force this momentum, Van Rompuy emphasised that the option was in or out. 

"The wish to redefine your country's relationship with the Union has not gone unnoticed," said Van Rompuy, a former premier of EU founding member Belgium. "I cannot speak on behalf of the other presidents and prime ministers, but I presume they neither particularly like it, nor particularly fear it."

Perhaps Van Rompuy thought that his line was a clever construction: emphasize the costs and introduce the notion that other members of the European Council are not particularly bothered. This could be defined as an emotional defence. Describe the exit as a form of petulance and indulge in personal metaphors as a descriptive narrative. If you judge this possible exit in a cold light: one of the biggest members leaving; Van Rompuy's speech trivialises the whole process and avoids an actual debate both here and in Europe.

The same symptoms are also displayed in debates over the Euro: an inability to engage with the catastrophic problems of the currency zone and rhetoric that puts forward stories without meaning. Sometimes, the utterances of EU spokespersons rival Comical Ali in their distance from reality.

How does this affect Cameron's wish to renegotiate relationships with the European Union? These statements prove that the ideological underpinnings of 'ever closer union' prevent the Commission and the European Parliament from supporting realistic changes to membership status. Their adherence to all or nothing leads those opposed from in to out. A truer question is how far their adherence will take them if political events within the Eurozone starts to undermine that glue?

Budgeting for failure

The real difficulty arriving for Cameron is coalescing on the budget. He cannot say one thing to his fellow leaders in Europe: I hobnob with you but unless my parliamentarians swallow the biscuit, you can forget agreement of a budget. Still, it is a proud moment that the Mother of Parliaments rather than the Bundestag is forcing the pace in Europe for once. 

Cameron is caught between a Europhile coalition partner, restive backbenchers and opportunistic Labour. Miliband has called for a freeze, co-operating with Mark Reckless and the neo-bastard wing of the Conservative Party. The Prime Minister's instinct for compromise has led him to be outflanked by Eurosceptic rivals and the Opposition. Voting paralysis on European developments is a real possibility.

If Cameron is boxed into a veto, this will give an impetus to set up separate institutions for the Eurozone outside of the EU. Integration will then take place outside of the current formal structures. The accepted given of British disengagement and withdrawal will come ever closer to reality. And faced with Janus administrations of pro and anti-Europeans, our influence will be weakened whatever governments do. Romano Prodi is correct: Britain will face grave difficulties if we opt to stay in the EU and attempt to maintain parity with an integrated core; we will be outvoted every time. This is not an option.

When the next election occurs, integration around a core single currency will leave us on the sidelines. The Liberal Democrats and the Labour Party will have severe difficulties explaining why they shoudl give up what little power they have left for the ability to squeak and be overruled. I think we can expect a further revolution in attitudes to Europe on the Left. 

De Generation Game

They will have to write off the debt from each state on the debt generation game as they travel along the conveyor belt from realisation to depression. In a bathetic reversal of what we see, a journey from the ridiculous to the sublime. 

Yet Sweeney Todd in the economic guise of Debt is about to swing his razor and impose a swinging haircut on all Greek debtors. Most frightening of all, for those who chose to march to the funeral tune of the 'Day of the Dead', is that the haircut will decapitate the myth that taxpayers are inoculated from credit writedowns.

Those taxpayers will not be happy...