June 04, 2005

EU leaders forced to calm jitters over euro

THE political crisis that has engulfed the European Union since France and the Netherlands rejected its proposed constitution yesterday threatened to spill over and damage the euro.

Embattled EU financial leaders spent the day defending the currency, dismissing talk of its break-up as “absurd”. One senior EU official said: “Euro notes and coins are for ever, like the euro.”
[That's probably what they said about the mark, the franc and the lira not so long ago, too.--Jen]

In a symptom of the seriousness of the creeping doubts, Roberto Maroni, the Italian Welfare Minister, had suggested in an interview with La Repubblica that a referendum should be held on bringing back the lira.
[Si! Si! Do it!--J.T.]
The euro had “proved inadequate in the face of the economic slowdown, the loss of competitiveness and the job crisis”, he said.

“Wouldn’t it be better perhaps to return, temporarily at least, to a system of dual circulation of the euro and lira?” He cited Britain as an example of a nation “growing and developing by holding on to its own currency”.
[I love this idea and I'm a bit angry the other EU members didn't adopt this system first before completely abandoning their own historic currencies for the EUro.
They'll learn, I hope, but too bad it's the hard way.]
[...]

An economic adviser to José Manuel Barroso, the President of the Commission, gave warning that the situation was “dangerous” and that some countries would want to leave the currency. For the first time financial markets are speculating that the euro may collapse, by offering variable long-term interest rates on government debt in different eurozone countries.
[Pardon me, but what in the hell is a "eurozone country?"]
However, Joaquín Almunia, the European Monetary Affairs Commissioner, said: “The euro forms part of our landscape. I think nobody is going to succeed in eliminating an achievement that cost us a lot to bring about.”
[Hey, Joaquin, it didn't cost anybody but the folks, as Bill O'Reilly would say!
Do these EUrocrats really believe this mindless drivel they dish out to the "little people?"
No wonder the French and Dutch voted "no!"]

The markets had already been shaken by a newspaper report in Germany that Hans Eichel, the Finance Minister, had attended a meeting to discuss the break-up of the euro. He denied the story.

On Thursday, Jean-Claude Trichet, the President of the European Central Bank, dismissed speculation about the end of the euro, calling it “totally absurd” and “complete nonsense”.
[When President Bush calls something "absurd" like that Amnasty Int'l. report that Gitmo was a "gulag," you can believe him, but when it's M. Trichet saying something's absurd, namely the busting up of the confidence game that he's in charge of, you've got to start worrying...--Jen]

Many of the countries which joined the euro have suffered economic stagnation and rising unemployment, with people also blaming the currency for rising inflation. Although the German and French economies are stuttering, Italy has plunged into full blown recession.

The euro is vulnerable to a collapse in public support because none of the 12 countries that joined it allowed their people to approve the decision in a referendum. Many Dutch used the referendum on the constitution to show their disapproval of the euro, while in Germany polls show 56 per cent of people want to return to the mark.
[Of course, a recent poll showed a lot of Germans want the old Berlin wall and Soviet Communism back, too, so you can never tell if they've come to their senses or not!]

A report called The Demise of the Euro by the Centre for European Policy Studies, a think-tank funded by the European Commission, admitted that the currency was probably responsible for Italy’s economic problems, which it predicted would soon afflict the majority of countries in the eurozone.

Confidence in the euro collapsed in the markets after the French and Dutch referendums, because economists believe that it would make it difficult for governments to co-ordinate action to keep the currency stable. The currency had already been hit by the collapse of the Stability Pact which underpinned it. Eurozone governments are now openly flouting their legal borrowing limits.

I didn't take such a week off from blogging that I didn't follow the news and this was an amazing week!
Who wouldda thunk the French would finally do something right (even if it was for a lot of wrong reasons) and vote "Non" against that wretched EU constitution of homeboy Giscard d'Estaing?
Of course, after that, it was a sure thing that Holland would vote "Nee," also and even more strongly than the Frogs, because Holland has had one of the best economies in Europe and they've had enough of a taste of the EU's multi-culti policies to not so politely decline being force-fed any more.
I can hope for the best which is a dumping of the EUro and following that, relegating the entire EU apparatus to being nothing but a "free trade zone."
The countries of Old Europe were happier and more prosperous when they were autonomous, sovereign countries.
IMHO, they have pulled themselves bank from the brink of full scale disaster.
Call me a loyal Bushie, but I think the Bush Doctrine has had an effect even on these people, who live in the places where democracy and the Enlightenment had its roots.
Apparently, they forgot for a while that government by consent of the governed was the most enlightened political system of all.
I can't be too glad that they remembered in the nick of time--and it's very likely that the Iraqi election, the election in the Ukraine and the Cedar Revolution in Lebanon gave them all the reminders they needed--that the people having a say in their own governance through their vote was critical.