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|There are ways to get out of labyrinth. The point is that European leaders must first accept that they were wrong and second, that the crisis is systemic and requires system-wide solutions.|
In an article a few days ago I wrote about the new order in the systemic crisis of the euro in which I described how bleak the current situation is and how if things stay as they are, the euro is heading with mathematical accuracy to its collapse. It appears that as time passes the situation gets even worse, since people all across the surplus countries are rightfully protesting against the maladministration of their taxes. Citizens are protesting against the ill advised policies of European leaders who throw tax money into the black holes of the system. The latest event that fully aligns with the situation I have been describing long now, took place in Germany and has to do with the German Bundestag. From the European news portal EurActiv.com we get the following:
Early polls on an upcoming vote in the German Bundestag show growing opposition to the EU’s crucial bailout fund and its expanded powers to purchase the bonds of indebted countries…</p>
…A body of opposition is building against German chancellor Angela Merkel and her government’s latest version of the EFSF. The German magazine Focus reported over the weekend that 23 members of Germany’s governing centre-right coalition are gearing up to vote against the EFSF.
…Even Merkel’s most loyal followers in her own Christian Democratic party (CDU) are undermining her authority. Wolfgang Bosbach, a long time CDU member and deputy parliamentary leader, has said he will rally against the EFSF.
It is clear that opposition to the failing policies of the EFSF is growing. It is also clear that the practice of wasting taxpayer money to fund expensive, yet highly ineffective, bailouts to individual countries is creating social unrest. The economically illiterate and politically dangerous practices that European leaders are adopting produce adverse effects, both in dealing with the crisis and in consolidating the idea of a common European identity.
European leaders cling on to their vaunted policies and to their failing beliefs, thinking that they are controlling the crisis, when in truth they are leading the euro to its doom, the idea of a common Europe to its grave and a whole generation into agony and under-development. This madness must stop before things become uncontrollable. System-wide solutions are necessary. Solutions that will put an end to the catastrophic policies that have been followed so far.
A new deal for Europe is what we need. Within the context of this new deal, three fields of action exist. The first is to allow the ECB to issue eurobonds (see my full analysis on the eurobonds issued by the ECB) so as to attract the surpluses of central banks and wealth funds outside Europe, thus putting an end to the catastrophic maladministration of taxpayer money. Only the ECB can carry out that role, since if we follow the proposals of others who argue about “jointly guaranteed” bonds then we will surely keep on doing the same things. A jointly guaranteed eurobond is as toxic and ineffective as the EFSF that more and more are now opposing.
Second, we must finally find a way to mobilize the giant called European Investment Bank (EIB) to carry out structural investments across the continent, especially the European periphery, co-financed by the ECB’s eurobonds, so as to halt the spiraling recession and give a growth boost that will in the long-term stabilize the countries who now face serious shocks. The reason that the EIB is now unable to move, lies in a clause that exist in its constitution, which demands for a 50% co-financing by nation-states. Now all states are facing tough times and none is able to meet that target, hence the EIB becomes practically useless. However with the use of Eurobonds from the ECB, this clause can be satisfied with ease and finally the EIB (which is twice the size of the World Bank) will be used in a very rational way.
Third find a non-degenerative role for the EFSF (which as I have previously explained is founded on toxic foundations, which cause contagion). Make it an authority that will supervise and re-capitalize (whenever necessary) the unified European banking sector. Recapitalizing the banks does not mean bailing them out. It means offering capital in exchange for shares, in other words a process of nationalization/europeanization of private banks. Once banks are nationalized and once they are removed of the toxic waste that remains in their books, they can be privatized again with profit. Therefore no taxpayer money is any longer sucked into the ill regulated, quasi-bankrupt banking system.
There are ways to get out of labyrinth. The point is that European leaders must first accept that they were wrong and second, that the crisis is systemic and requires system-wide solutions. For the time being the deny both, with the catastrophic implications this can have.