Thursday, August 2, 2012


Today was supposed to be the Euro salvation day, after the ECB president said last week that he was now prepared to do "whatever it takes" to safeguard the Euro. Nothing drastic happened . We should have listened with more attention to the  ominous parallel analyses from the president of the Bundesbank Jens Weldmann or  Christine Lagarde, head of the IMF, who sounded more cautious in their assessments.  Mario Draghi is obviously a very creative and astute banker. He might have underestimated though the resistance which exists amongst the member states to use the permanent or temporary bailout fund for secondary-market bond purchases.  Paradoxically, the weaker Euro aids the major exporters and widens even more the divide between Germany and the ailing peripheral members.  Accordingly, the stock market and the Euro might return to their downwards spiral, benefiting too few while penalizing too many.

The Euro began in a sceptical mode, went into an euphoric overdrive, and fell recently on hard times.  The cycle has staying power.  This hangover will last.
I believe that the problem lies in over-politicization, so that a succession of therapeutic monetary interventions brings only a small solace to a small number. The Euro was meant to be binary political instrument. The bankers, technicians and wizards had to be content with a second tier. The politicians created a hybrid in Frankfurt, monopolised the better seats, and daydreamed some ersatz fantasy of the school of  the Chicago Palimpsest. The myth was hence created that the EU was the Euro and vice versa. This is bogus. Not all EU members adhere to the Euro right now, and the "opt out" formula should be called upon where necessary (precedents exist.)  Besides, the ECB is anything but independent (as it should be) from the states which are represented in its governing board.  The fiscal and economical cacophony is deafening.

One can argue over Friedman or Krugman, zero inflation or a little inflation. Such discussions are normal between specialists. They can however become perverse when they oppose member states, who find themselves already divided by dangerous fault lines. The Greek and Spanish sagas are also toxic because they tend to reinforce socio-cultural cliches which split Europe in half and undo the visionary philosophy, which since World War II, brought about reconciliation, peace, prosperity and a common destiny for most. The totally obscure Maastricht Treaty fiasco, the referendums (i.a. in the Netherlands and France) were a clear signal which indicated that the Brussels jargon was no longer a unifying factor.  Public opinion expected an American type of constitution. They received instead a bureaucratic set of rules and ambitions without an inch of "sex appeal." The Euro was supposed to bring people together at a time when a hidden civil war opposed immigrants and Europeans, old and new Europe, and the United Kingdon versus the rest. The Euro looked good on paper.  If the Greek farce cannot be contained, it risks ending up in the shredder.  Once again Adam Smith will have to rule.  "Self interest" is to economy what Darwin is to existence. Both can help us understand why Germany is so adverse to absorbing shocks created elsewhere.  The ECB architecture has to undergo drastic changes or it might as well dissolve like a house of cards.  The outlooks remains bleak and the consequences might reach shores which had better remain off limits, and unspoken.

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