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|Image Source: Reuters|
According to a report from Reuters, European Council President, Herman Van Rompuy said that he foresees no recession in Europe.
If we were to believe what Mr. Van Rompuy claims, then we need to ask ourselves what was the recent meeting between French President Sarkozy and German Chancellor Merkel about? Why did they produce a joint-letter filled with proposals for the future (and viability) of the eurozone?
Moreover why has the ECB stepped into a war it cannot win, to buy Spanish and Italian bonds? Also why is the concept of the eurobond been discussed even in Germany, a country that maintained a hard line against such proposals? Additionally, why Finland and others now ask for collaterals in order to contribute to the second Greek bailout?
Of course we face a recession and things will get worse as long as people like Mr. Van Rompuy who hold the fates of the EU in their hands do not accept reality and do something about it, instead of pretending that everything is fine.
In a previous article titled EU officials stick their heads in the sand – Oli Rehn was the latest I wrote the following which seems to have universal application when talking about the statements of high ranked EU officials:
For European officials and for certain European leaders it seems that there is no seriously malfunctional banking sector, there is no fallacious monetary policy, there is no persistent unemployment and negative growth. There are no flaws in the way the EU deals with the crisis.</p>
…Instead of embracing reality and accepting that a) the crisis is systemic, b) they have made serious mistakes so far, c) a solution requires a fundamental change of approach, European leaders keep on searching for exogenous and irrelevant factors to put the blame for their failures so far.
…Reality is there, those who are in charge of EU matters must stop pretending they do not see it, because all they do in that way is to make things worse. Do they really believe that by making statements that aim at calming down the markets, they succeed? Absolutely no. The markets will only calm down once concrete solutions are put to practice. Theories and metaphysical factors do not affect the behavior of the markets. They only fuel speculation even further.
At times I wonder whether our leaders have grasped the severity of the moments and the weight of their responsibility. I understand that statements such as that of Mr. Van Rompuy aim at calming down the markets by projecting a peaceful and controllable situation. This is futile though and even if it has the most sincere of intentions it ends up producing adverse effects since everyone knows that these words are completely detached from the real world. The markets can tell the difference between wonderland and the Eurozone/EU that is why the ad hoc, half-measures that European leaders agree to from summit after summit and from meeting after meeting utterly fail to control the crisis and contain contagion.