-
April in Paris
April 11, 2013 | 11 comments
-
France Meets Ugly American
April 4, 2013 | 23 comments
-
Kerry Chéri
March 16, 2013 | 0 comments
-
Sarko Redux
March 11, 2013 | 4 comments
-
Flanby’s War
January 17, 2013 | 39 comments
Letter From Paris
Crisis In Euroland
The end of Funny Money?
The euro, that artificial Funny Money used by 331 million Europeans in17 nations — the 17th, Estonia, joined the euro just this week — was conceived in sin and born in corruption. The New Year brings the prospect that the sins of the European Union’s founding fathers will be visited on its hapless citizens in the form of financial turmoil and fiscal pain.
The original sins at the euro’s conception included stealth, lies, and hypocrisy. That at least was consistent with the creation of “Europe” in the 1950s, when politicians with mixed motives recklessly signed off behind closed doors on whatever was necessary to bring forth the European Economic Community, later optimistically re-baptized as the European Union, a.k.a. “Europe.”
Contrary to the organic, bottom-up growth of a real nation, this was all done top-down with little or no democratic consultation with Europe’s citizens. (The Brussels-based Eurocracy, now occupying gargantuan buildings in the Belgian capital, euphemistically calls this a mere “democratic deficit.”) But the fact that there was no true political union, and even less centralized economic and fiscal authority, did not deter the EU from declaring a phony monetary union in 1991.
The pretense that this was a step to political unity was at best wishful thinking, at worst pure hypocrisy. The unstated reality was France’s goal of using the euro as 1) a weapon against the dollar, and 2) a way to hobble an increasingly powerful Deutsche Mark and soon-to-be reunified Germany before it left France in the dust. Premier Helmut Kohl, like the great majority of Germans, was cool to the idea on both counts. But he reluctantly went along with the euro when President François Mitterrand sweetened the deal with French backing for German reunification and defense guarantees including France’s nuclear weapons.
In the land of Eurofudge, where nothing is quite what it seems, Funny Money’s inevitable corruption began with its official launch in 1999. Membership in the euro zone — 11 countries initially qualified — was supposedly tied to strict budgetary discipline: member countries’ annual deficit was limited to 3 percent, and total debt to 60 percent, of GDP. But in the absence of any real verification, the rules were routinely flouted.
Some southern countries like Greece flagrantly manipulated statistics, cooked the books, and generally faked it. They and others, like Ireland and Spain, took advantage of bountiful money flowing from Brussels. There was also easy credit to go on spending sprees on infrastructure and entitlements. But even in Europe, corruption can only get you so far. When the markets called the euro’s bluff last year, it meant crisis in Euroland.
Today Europe’s sky is dark with chickens coming home to roost. In a defining stress test, all the European Union’s papered-over cracks in its political, financial, and economic structure are showing up. This could be the year when we will learn whether a technocrat’s delight, history’s only example of an artificial currency without a nation-state behind it, can survive.
The Eurocracy’s hastily thrown together $1 trillion emergency rescue fund was enough to bail out debt-ridden Greece and Ireland — so far — but now speculators have bigger game in their sights. That includes Portugal and Spain near term, with Belgium, Italy, and even France as possible targets later on. EU policy makers are bailing furiously at one summit meeting after another, but their financial buckets are small compared with the gush of both sovereign and banking debt. As the Wall Street Journal put it nicely, “Greece found out it can’t pay its creditors, Ireland thought it could but it couldn’t, Portugal and Spain think they can, but they can’t.”
If a member state defaults, it could trigger a Humpty-Dumpty breakup of the euro zone with unpleasant consequences. One result, according to many scare-mongering EU leaders, would be the end of “Europe” as we know it.
French President Nicolas Sarkozy, for one, tried to put the fear of God in his compatriots last week during his traditional New Year’s address to the nation. Warning against thinking the unthinkable — i.e., any possibility of France’s dropping the euro — he threatened that the whole jerry-built EU would come tumbling down if the currency disappeared. “Don’t believe,” he warned in the somber tones usually reserved for declarations of war, “those who suggest that we should leave the euro… The end of the euro would be the end of Europe.” For good measure, he raised the specter that the euro’s disappearance would undo 60 years of European peace and brotherhood.
That the EU has brought peace and love is official Eurodogma. It is also patently false. (Precisely which war has Brussels prevented? As for European brotherhood, try asking the French what they really think of Germans, and vice versa.) It is also obviously untrue that the demise of the euro would mean the end of Europe. In the 19th century there were two European attempts at monetary union, one among Latin countries and another in Scandinavia. Both collapsed. But Europe, at latest report, is still with us.
If not peace and love, what the EU has brought is the habit of obfuscation and flagrant cheating on its own rules. In this case, the new permanent system for rescuing member states unable to pay their debts, the so-called European Stabilization Mechanism, is a clear violation of the 2009 Lisbon Treaty. As the EU’s constitution, the treaty explicitly forbids financial bailouts of member states by each other. Normally, a change this important in the EU’s basic governing document would require a referendum and approval by all 27 member states. But it is being treated officially — and falsely — as a “limited treaty change” that does not require the consent of the citizens.
Admitting that this is a major transgression, France’s finance minister, Christine Lagarde, is unrepentant. “We violated all the rules because we wanted to close ranks and really rescue the euro zone,” she says, momentarily abandoning official Eurospeak. A group of outraged German economists is asking the German Constitutional Court to rule on the legality of such a violation of EU rules.
This European train wreck could be seen coming for miles. The very idea that monetary union could be created out of thin air, without joint fiscal and tax policies or other federal-style control, was nonsense to many conservative observers both in Europe and the United States. For starters, Great Britain was having none of it and opted out of the euro zone (as did Denmark), thanks to Margaret Thatcher. The lady knew instinctively that such a move could only be based on a common culture, history, and traditions, none of which “Europe” had. Her chancellor of the exchequer, Norman Lamont, said at the time, “So long as such a divergence exists, a move to a single currency would represent a massive leap in the dark.”
So too America’s conservative economist Milton Friedman. Winner of the Nobel Prize and advisor to presidents Richard Nixon and Ronald Reagan, Friedman predicted the euro’s demise within a decade — which, given today’s turmoil, makes him look prescient indeed. “The euro,” he said, “has been motivated by politics, not economics. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.”
Most of the EU’s citizens don’t need a PhD in economics to know the euro was a mistake. (One notable exception: it’s a great success with international criminals, who love 500-euro notes, much more convenient for money laundering than $100 bills.) A Europe-wide poll before the current crisis showed that two-thirds of French, Italian, and Spanish citizens, and over one-half of Germans, thought it had had a negative impact on their national economies. Nearly half of German citizens say they would like to drop the euro altogether and return to the mark. Many put their money where their mouth is: today, nine years after the euro became the official EU currency, German mattresses bulge with 13.45 billion D-marks in cash, about $9.3 billion, that they prudently kept at home and never exchanged for euros.
About the Author
Joseph A. Harriss is The American Spectator’s Paris correspondent. His latest book, An American Spectator in Paris, was released this fall.
Letter to the Editor View all comments (46) | Leave a comment
More Articles by Joseph A. Harriss
More Articles From Letter From Paris
http://spectator.org/archives/2011/01/04/crisis-in-euroland
Follow us:
ADVERTISEMENT
SPONSORED LINKS
FLASHBACK TO: 1995
-
Pope Culture
A man of faith in a godless age is hitting Americans where it hurts.
-
Why the GOP Does Not, Like, Totally Suck
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
-
Dames at Sea
-
In the Absence of Guns
In Britain, defending your property can get you life.
-
The Metaphysical Martini
-
Counting the Costs of Clintonism
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
-
Chuck McHagel
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
-
The Legacy of Old John and Mother Fresh-Roasted
-
It’s the Best Time of the Year
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
-
The Bush Crack-Up
Was the President done in by the economy, or by the politics of the economy?
Clip of the Day
ADVERTISEMENT
Kenny| 1.4.11 @ 7:09AM
Europe's economic & monatary problems, coupled with its Islamic cancer, could make for some explosive news in 2011.
Appleby| 1.4.11 @ 7:26AM
The Euro is going the same way as Esperanto for the same reason. A building without a foundation cannot stand.
saleboter| 1.4.11 @ 7:43AM
Watch Germany. They will opt out of the euro eventually
Ken (Old Texican)| 1.4.11 @ 8:02AM
Folks,
Each and everyone of you needs to buy Mark Steyn's book... "America Alone"! (even before you buy my book...Part One Of "America Alone Said NO!" www.texassaidno.com )
I have predicted over and over again an "event" in 2011 that will turn everything upside down. It will be a combination of economics, and politics,
and ............................
Melvin| 1.4.11 @ 11:22AM
Ken, tease you.
Melvin| 1.4.11 @ 11:23AM
I meant was. Ken your such a tease.
MoeBlotz| 1.4.11 @ 8:20AM
Ireland was such a rich country when their currency was Sterling and their capital was always Dublin. Look what happened when the Irish sent their capital to Brussels.
Brian| 1.4.11 @ 11:46AM
Sorry, when Ireland used sterling we were dirt poor. We became wealthier after joining the EEC (EU) and while joining the Euro may have helped fuel the housing bubble it was not the only factor. We have not sent our capital to Brussels either.
Lesser Weevil| 1.4.11 @ 2:13PM
It's a joke, Brian. "What is the richest country in the world?" "Ireland, because its capital is always Dublin (doublin')."
Anthony| 1.4.11 @ 8:30PM
Ireland was a rich country when its people were good Roman Catholics who honored family and church over money and sex.
JP| 1.4.11 @ 8:45AM
Last year for a few days there were rumours that the Deutsches Bank was demanding that the Greeks sign over valuable real estate as collateral in order to secure new EU (read German) loans. This rumor died a violent death as the memories of WWII and German occupation were revived.
This should be another warning to our own government.
C. S. P. Schofield| 1.4.11 @ 9:05AM
When the Euro first came out I was heard to speculate on whether buying a proof set of the first year would be a wise investment or the equivalent of buying Confederate dollars.
My (Liberal) in-laws demanded to know what I meant, to which I replied that I had very little faith in a Union that included both France and Germany. They asked me "Do you really think that the French haven't forgiven the Germans for WWII?". I replied that the French have not forgiven the Germans for siding with the British against Napoleon, much less for either World War or (for that matter) The Franco-Prussian War.
My in-laws think I'm odd.
Sam Vaughn| 1.4.11 @ 9:38AM
C.S.P. your comments, my chuckle of the morning. I'm an avid amateur historian. It never ceases to amaze me when I get in a discussion with supposedly sophisticated and well educated liberals how shallow their knowledge of history is, plus, the lack of understanding of Europe. While they accuse Southerners of still fighting the war of Northern aggression over 140 years ago they have no idea what was going on in Europe at the same time. Echoes of the Napoleonic destruction of Europe still reverberate today not too mention all the other maladies of a Europe very much embroiled in class warfare with the tacit assistance of those on the left and right. And yet Europe is what liberals generally admire and want to emulate.
I'm reminded of my french grandparents who came to this country to escape systems and society that would never let them transgress their peasant roots. They thanked God everyday for America, I heard them. Never mind that they worked hard, long hours in the factories of Connecticut. The love of freedom was in their soul, I can only guess what they must have escaped to have kindled such a fierce love of freedom, liberty and the chance to be whoever you want to be without interference.
edo| 1.4.11 @ 10:04AM
"And yet Europe is what liberals generally admire and want to emulate" -- that's because when libs go to Europe, it's to vacation and hang-out in cafes. What a life!
Appleby| 1.4.11 @ 11:29AM
I think the same thing when I hear tantrum-throwing movie stars claim they will move to Canada if the President is not to their liking. I dare any one of them to take up permanent residence in Toronto and not be fleeing across the border again before Easter.
idalily| 1.4.11 @ 3:30PM
I keep offering to help them pack. Sadly, it doesn't help.
missbosslady| 1.4.11 @ 11:53AM
Of course, liberals love Europe, it has nationalized infantilism.
Where else can a liberal go to experience a culture where hard work is a sin? Where the state promises to take care of you from cradle to grave? This is the dream of every developmentally arrested liberal.
idalily| 1.4.11 @ 3:42PM
True. But I'm not sure they can ever change. It's their history. Europe suffered under this sort of thing long before they called it socialism. It was called feudalism. Pay it to the barons, pay it to the dictator, pay it to the king, pay it to your social-democracy nanny state. There is no difference. You are still a serf. That's why there's so much denial that America is exceptional. Because if they admit that, they admit they are not. They traded their individual liberty for safety long, long ago and they are too scared and dependent to ever get it back. Deep down, that's why they resent us.
svein| 1.6.11 @ 7:09AM
America is exceptional i agree... exceptionally arrogant and corrupt.
Bert K| 1.4.11 @ 5:07PM
I agree with most points made in the article and most points made in the thoughtful comments.
Here a few clarifications, though. Napoleon, with all his flaws, liberated a huge chunk of the European masses, mainly in Germanic territory and Northern Italy. My ancestors were without rights and "owned" by their princes, until Napoleon brought those to their knees and introduced a legal system for all. Already then, Europe looked to the US for leadership, and already there they did it in a flawed manner.
But yes, while he was an egomaniac he did more for democracy and freedom in Europe than the Brits have ever done with their "balance of power" policies.
Another observation about what the French really think about the Germans, and vice versa. I think this is arguably the biggest achievement of post-World War policies: They really respect and genuinely like each other. About as much as Yankees and Southerners, or even more.
Nothing is perfect, but who ever saw the huge graveyards reflecting wars in Central Europe may very well conclude that averting war between the countries of the European Union was an achievement.
I agree with most other points.
All this from a proud American immigrant.
anvelope | 1.4.11 @ 9:49AM
I never could said it better: "The euro, that artificial Funny Money used by 331 million Europeans" . Well done !
Seattlebred| 1.4.11 @ 10:19AM
"France's finance minister, Christine Lagarde, is unrepentant. 'We violated all the rules because we wanted to close ranks and really rescue the euro zone,' she says." One must admire the element of honesty in that statement.
On this side of the pond, when asked to constitutionally justify Obamacare, we can't help but remember Mdm. Speaker's fine bit of enlightenment: "Are you kidding? Are you kidding?"
edo| 1.4.11 @ 10:23AM
Europe is looking more like "Entropa" everyday, as Czech artist David Cerny foretold with his humorous and controversal "Entropa" art installation in Brussels:
http://news.bbc.co.uk/2/hi/7827738.stm
PJ| 1.4.11 @ 11:16AM
What a meaningful piece of "art"! There'a no guesswork in interpreting this piece. Even the European politicians who have to walk pass it seems to understand it! WOW!
howard lohmuller| 1.4.11 @ 10:50AM
While Mr. Harriss accurately describes the currency crisis within the Euro zone, it should be noted that Germany and France have benefited financially for the long term and the Southern tier of Europe for the short term.
Germany's economy for example, 47% exports, is doing well with low unemployment because the Euro has depreciated against the dollar due the the crisis. It is in Germany's interest that the unrest continue. If the Euro failed and the mark came back, it would strengthen against the dollar hurting German exports. The same applies to France anf the Franc.
The Southern tier countries, Spain, Portugal, Greece and Italy have prospered till now, attracting capital and spending it and borrowing more. They will have to pay the piper now. But Germany and France will help unless the cost of the help exceeds the benefits of a cheap Euro.
Bill Sundling| 1.4.11 @ 6:44PM
Germany's unemployment is about 7%. That's not low by historical standards. You can check it out here:
http://www.bls.gov/ilc/intl_un.....onthly.htm
Richard Baker| 1.4.11 @ 11:12AM
Years ago I said that regardless of this "Union" that Germans will be Germans, Italians will be Italians, and so forth. We're not speaking of a cohesive region with one view. We're speaking of the very embodiment of independent states. This "Union", in my opinion, is a nothing but a French attempt to be great again. It has failed and the French are a basket case.
Pelligrino| 1.4.11 @ 11:17AM
The breakup of Europe in its EU (monetary union) status is inevitable.
Any traveler in Europe (western and eastern) in the late 1980's and early 1990's could easily see large disparities between Europe's nations. Even the very stark differences within nations like Italy (north vs. south), Spain, and France.
Germany, Switzerland, the Netherlands, and parts of Denmark and England were chugging along, making good industrial, economic headway.
Not at all so in Greece (outside the best touristed areas), Portugal, all of southern Italy.
The gaps in standards of living were huge! Just look at the divide in Belgium between the Dutch speaking part and the French part. It is much more pronounced once departing northern Europe for southern.
It was OBVIOUS that the 15-20% successful Europe (all north of the Alps) would be propping up the lazy, malingering, mismanaged, non-entrepreneurial, and corrupt.
Painfully obvious.
Today the EU encompasses all the ills of Eastern Europe with inclusion of the corrupt (former communist party leaders who used those same life skills to position themselves well in the new era) Polish, Hungarian, Czech and now Romanian and Bulgarian lands.
And everyday you have bureaucrats in places like Brussels, Strasburg, and Luxembourg City making vital decisions for citizens in parts of Europe they will never visit or care to visit (sound familiar?)
It was very odd to see Czechoslovakia divorcing itself in 1993-94 and the year-by-year break up of former Yugoslavia into now 7 different distinct parts without wondering: How do these Europeans in Paris, Berlin, Madrid, and Rome with a straight face laud and forge the greater central governing of all of Europe (with massive, crippling regulation) while watching citizens -- gleefully -- in localized areas permanently part ways?
The crisis in Euroland was there from day one.
Redstateboy| 1.4.11 @ 12:09PM
the EU is just one more glaring example of the failure of Liberalism which Liberals have that uncanny ability simply not to see. Their Cities crumble, their States are bankrupt and yet.. everythings just dandy in Liberal-land.. Something inherently wrong with Liberalism??!! Impossible!
idalily| 1.4.11 @ 3:32PM
It's a cult and they are brainwashed.
George S| 1.4.11 @ 1:18PM
When one creates play money and expects it to be a viable currency without a) centralized monetary policies, b) disparate fiscal policies, and c) not having to pay for a military defense, it is only a matter of time for this to turn into the tragedy of the commons as each nation state attempts to extract the most socialist goodies without the labor to back them.
My relatives in one of those foundering EU countries thought the euro was the greatest thing ever to happen -- until the price of everything skyrocketed. When they asked my opinion -- as to which United States policy was the culprit (naturally!) -- my response was now you have to compete with the German autoworker and the French aerospace worker in buying power instead of your fellow countrymen. Or, it is no different than you taking your "skills" into France or Germany and looking for a job. Somehow, that registered with them. Thankfully, everyone else over there is slowly coming to the conclusion that there never was a free ride. Euro: RIP.
MM| 1.4.11 @ 2:02PM
How is the EEU any different than what Hitler visualized creating with his "1000 Year Reich", other than the EEU being centered in Brussels?
idalily| 1.4.11 @ 3:33PM
No difference, and it will last about as long. Hopefully, its end will be less horrific.
Oldefarte| 1.4.11 @ 2:27PM
Joseph's editorial is very informative, and the truly sad thing is that Europe's financial disease is headed our way. If these incoming Republicans don't begin immediately the process of dismantling the Democrat oriented socialistic state here in this country, we will be sucked down the financial toilet to bankruptcy along with our Europeon [so-called] FRIENDS!!!!!!!
davelnaf| 1.4.11 @ 3:04PM
America was always the better Europe that started from scratch to build a far more stable national government. Its way was—and still is—a pretty good template if you want to make something that big work over a fairly long period of time. But even the US did not gel completely until after the Civil War.
The Euros believed they could do what the US did over two centuries ago with a far more divergent group of countries than the Thirteen Colonies ever were. In the process they tried to sweep their many differences and European history under the memory rug. It was not to be Cheri.
ColonialBoy| 1.5.11 @ 8:33PM
This is the 2nd comment I have seen expressing the fiction that after the war (recorded in the official US Army records as the "Southern Rebellion of 1860") ended in 1865, Americans became one, big happy family. The reality is that prior to WW1, the Federal govt was funded by tariffs, and the 1858 tariff act effectively forced the Southern agricultural economic establishment to choose between funding an increasingly hostile Federal government or paying for the industrialization of the North. This act (which is was the "final straw" in the eyes of the South, and led to its attempt to leave the Union) wasn't repealed until Bush41! Several major laws are still in effect (voter's rights acts, anti-segregation educational laws & etc) ONLY apply to the former Confederate states. Rebs and Yanks still largely despise each other, and only cooperate when faced by someone from outside of the country (such as Germany in during WW1 & 2).
I agree with you, though - there has been thousands of years of bloodshed in Europe and it is naive to think it will be forgotten.
Dixie Pixie| 1.4.11 @ 4:34PM
....What war was prevented....?
Why the Warsaw Pact Breakup Wars of course.
Given your blank look, I will explain.
When a dominant civilization controls a group of lesser civilizations it does so by monopolizing political and military violence. If the dominant civilization disappears then the suppressed civilizations will soon readjust long suppressed disputes by violence. This will often result in changes in governmental type and border adjustments. The Fall of the Roman Empire is the classic example. Those wars lasted for centuries.
The vaporization of the Soviet Union could have caused a whole series of border adjustment wars.
One example is when Stalin hacked off the eastern part of Poland for the USSR. He then chopped off a part of Germany and give it to Poland as compensation for Poland lost of land to the USSR.
Obviously after the USSR was gone there is a inherent pressure to readjust the German-Poland-Belarus-Ukrainian borders. Such a readjustment would certainly be by military means. This is just one example. Most of the Warsaw Pact nations has outstanding disputes with other Warsaw Pact nations.
So why did the Warsaw Pact did not blowup after the USSR folded. The reason is simple. The advantages of an economic union with the EU outweighed any gains from warfare. Best of all the current government officers get to keep their current positions when joining the EU. That was a major consideration and a plus for joining the EU.
The EU is unusual in that it is keeping the peace by economic means not by military means.
What European wars did the EU stop? It stopped all but the Balkans and Russia-Georgia wars.
Who Knows?| 1.4.11 @ 6:19PM
The EURO is fiat money.
"Let there be light" was morphed into "Let there be a unified PAPER currency", and as usual, hubris will bring nemesis---unintended consequences that nobody KNOWS.
Here's a killer question to ask people who aren't certifiedly insane---
"What is money?"
No doubt, the 80-20 rule would apply, so at least 80% of them wouldn't know the truth.
Actually, the failure to communicate the real TRUTH about practically every dimension of our lives is rampant, epitomized by the worsening results of tests of American kids on ALL subjects.
So, we have a plethora of economic IDIOTS running the show, AND the vast mass of citizens are totally illiterate about most things having to do with economics.
Money is a SYMBOL.
By ruining the big three uses of this valuable human invention---much better than barter---as a medium of exchange, a store of value and what's the third?---essentially we have anarchy in action.
That means that human relationships having to do with money are not as trustworthy as needed.
Anyway, Reagan taught us an eternal way to deal with the "soviets"---
trust, but verify!
Inherent in the "verify" demand, in my opinion, is that each human should not be naive about survival issues, and get the basics handled.
That is, boy scouts, BE PREPARED!
Have a stash of food and other essentials that would tide you over if the worst happened.
That's TRUE insurance!
Brian Richard Allen | 1.6.11 @ 2:16AM
The Europeons' Neo-Soviet, designed, like so much of the world's ugliest "fashion," in France - only this time by politicians - was intended to prop and to perpetuate the pretense permitted de Gaule after we had won WW-II, that he and/or France had anything to do with its liberation and/or was anything more than irrelevant in world affairs -- and to take on American Exceptionalism.
What it ever was, of course, was a kind of Neo-Soviet Neo-Canada that, as does Canada's world-traveling backpacker brigade, identifies itself as being "not America."
Well it's for sure it's not America.
And very soon it will also be Not Europe, too.
(Eurabia, perhaps?)
Will| 1.9.11 @ 4:53PM
A couple of quick facts you got wrong:
1) Denmark and the UK are not the only member states that refused to join, Sweden did as well, and;
2) Norman Lamont was John Major's Chancellor, not Margaret Thatcher's. Thatcher signed the UK up to the Exchange Rate Mechanism, the forbear to the Euro, but Lamont had to bring the UK out in 92 after it nearly cause a crisis in the pound. The man who should be thanked for keeping the UK out is Gordon Brown who, as Chancellor, blocked Blair's pro-Euro instincts.
Adidas | 8.11.11 @ 6:04AM
is good