From Neurope, ‘The European Political Newspaper’, on the proposed solution
1. The EU in general and the Eurozone member states in particular will be conceding their fiscal and borrowing sovereignty to a central authority. This could be achieved either through changes to the European Treaties or under a new intergovernmental structure such as the Schengen Agreement. In any case, there will be opt-out possibilities for those states that do not wish to participate, for example the UK and Sweden.
The Eurozone countries, however, will also make changes to their national constitutional charts, providing strong legal limits to budget deficits and sovereign borrowing. It is not clear if surplus countries such as Germany and Holland, which already have constitutional fiscal and borrowing constraints, will also be asked to abolish their financial sovereignty.
The crisis needs a very large and very quick solution. How can compelling 17 nations to cede huge parts of their sovereignty can be done quickly if at all? There could well be peasants with pitchforks in the streets in response, especially since the technocrats are making little mention about all that bothersome democracy stuff. And what assurance is there the technocrats can do a betterÂ job? Worse, many of them have worked for or have links to Goldman Sachs. If that doesn’t make you nervous, it should.
2. The new resources coming from the Eurozone surplus countries will be used to save the euro, together with additional financial support from outside Europe through the IMF. Russia has already said that it will contribute to such an IMF mechanism in favour of the Eurozone, and the EFSF will also be incorporated into this mechanism.
3. Following effective fiscal and borrowing limits being established in the Eurozone, the independent ECB has almost promised that it will use all of its financial resources, including the printing of new money, to offer unlimited liquidity for banks and governments.
Bingo, they will monetize the debt.Inflation is coming.
Desperate times do indeed sometimes call for extreme measures. But telling nations to give up financial control over their futures, if implemented, will almost certainly lead to major social unrest – as will fast-rising inflation.
The relief rally won’t last long as the funding will continue to be conditional to ongoing austerity and negative growth. And the austerity looks likely to not only continue but also to intensify, even as the euro zone has already slipped into recession.
So from what I can see, there’s no chance that the ECB would fund and at the same time mandate the higher deficits needed for a recovery, In which case the only thing that will end the austerity is blood on the streets in sufficient quantity to trigger chaos and a change in governance.
Our corrupt financial system and the governments it owns needs to be replaced. That’s the real solution.