When Mario Monti, the new Italian Prime Minister, who is not democratically legitimized, was asked if the latest summit was enough to halt the crisis and save the euro, he replied with the phrase “Well I hope so – I think so” (see video above).
It is this sort of inanity that characterizes all leading European politicians that has, ever since the beginning of the crisis, massively failed to produce a solid response to the negative dynamics. The euro is in an advanced stage of disintegration, either they want to admit it or not. Its survival at this point is highly unlikely, though it can be kept afloat at the expense of the real economy and society, if for instance the ECB starts printing money like a drunken sailor, or if tons of public funds from surplus countries are used to fill in the vast gaps that now exist. At any rate those who will ultimately bear the cost are the average workers and consumers who will either way see a massive reduction of their purchasing power and their income, in order to maintain the same restrictions to trade Europe-wide, the identical centralized bureaucratic policies, the failing pseudo-socialist interventionist policies, and ultimately to save the “too big to fail” banks and/or big corporations from failure (let alone all the issues of democracy and representation that will rise along the way, since already we see increasing undemocratic practices, e.g. “technocratic” governments, excessive powers to unelected institutions over national issues etc.).
The European Commission has already expressed doubts about the legality of the “intergovernmental treaty” that the majority of EU member-states are willing to agree upon, outside the scope of the existing treaties. It also challenges the rationale and applicability of those inane “automatic sanctions”, since the ECJ cannot be used outside the scope of the treaties. This largely confirms what I have already stated in my previous articles on the December 9 summit.
Also this week there will be auctions for Italian, Spanish and French sovereigns bonds. The markets will put to the test the borrowing capacities of these three countries. If their borrowing costs increase and if major credit rating agencies proceed with downgrading the triple-A rated countries such as France, then expect an acceleration of the destructive forces that are in place. The truth is that France is not worth of a AAA rating. Its economy is in a very bad shape, it has little prospects for growth, its banks are seriously exposed to the periphery’s debt.
In short increasing borrowing costs in the 2nd, 3rd and 4th largest economies of the eurozone will lead to an eventual downgrade in these countries that will also lead to a similar downgrade in the credit rating of the EFSF, the region’s (toxic) bail out fund. If the later proves true then the second bailout to Greece and the ongoing programmes in Ireland and Portugal will have a significantly higher cost, that will once again open a new vicious cycle.
European elites, united as always in inanity – and now divided over how to “best” move forward with their detached-from-reality treaty changes – have long now been promising a comprehensive solution to the crisis. They have long been speaking of “firewalls” and their “unequivocal commitment” to put an end to the free fall. They have been contradicting themselves time after time, like the fiasco with the “leverage” of the EFSF. They have been promising time and again tons of money as if that could come at no cost, as if there was some Santa Klaus who will provide them will all the capital they are in desperate need of.
Sorry people but money does not come out of thin air. The growth model of the EU together with the flawed design of the Euro leave no space for optimism or for any delusions that many continue to cultivate.