From (Labour Movement) CAEF - Campaign against Euro-federalism (in Britain)

To our trade union colleagues in Greece. We express solidarity with the actions taken by trade unions in Greece against the draconian criteria of the EU’s Growth and Stability Pact, and the dictats of the European Central Bank.

It is clear that cuts in Public Expenditure are part of an EU wide onslaught by big capital, the European Round Table of Industrialists, European Commission and Germany in particular.

These interests want the working class to “tighten their belts” and pay for and resolve the ills of the fiscal and economic crisis. At the same time it is an attempt to hand everything to the private sector and remove democratic accountability without any regard for the social consequences.

It is clear that for Greece and other EU Member States, including Britain, in a similar situation that the only rational course is to fully recover the right to self-determination and national independence and democracy.

We wish you every strength in your actions in this crucial period.

John Boyd
Secretary

CAEF is a member of TEAM

The Making of a Euromess

By PAUL KRUGMAN, New York Times, February 14, 2010

The real story behind the euromess lies not in the profligacy of politicians but in the arrogance of elites — specifically, the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such an experiment.
None of this should come as a big surprise. Long before the euro came into being, economists warned that Europe wasn’t ready for a single currency. But these warnings were ignored, and the crisis came.
It’s an ugly picture. But it’s important to understand the nature of Europe’s fatal flaw. Yes, some governments were irresponsible; but the fundamental problem was hubris, the arrogant belief that Europe could make a single currency work despite strong reasons to believe that it wasn’t ready.

Germany’s Choice

By Marko Papic and Peter Zeihan, STRATFOR, February 8, 2010

And so the rest of the eurozone is watching and waiting nervously while casting occasional glances in the direction of Berlin in hopes the eurozone’s leader and economy-in-chief will do something to make it all go away. To truly understand the depth of the crisis the Europeans face, one must first understand Germany, the only country that can solve it.

The eurozone’s next decade will be tough

By Martin Wolf, Financial Times

What would have happened during the financial crisis if the euro had not existed? The short answer is that there would have been currency crises among its members. The currencies of Greece, Ireland, Italy, Portugal and Spain would surely have fallen sharply against the old D-Mark. That is the outcome the creators of the eurozone wished to avoid. They have been successful. But, if the exchange rate cannot adjust, something else must instead. That “something else” is the economies of peripheral eurozone member countries. They are locked into competitive disinflation against Germany, the world’s foremost exporter of very high-quality manufactures. I wish them luck.

Are we about to see the end of the much-vaunted eurozone?

By Peter Oborne, The Observer, 3 January 2010

Before their decision to abandon economic sovereignty and sign up to the euro, policymakers had a tried and tested response to the kind of global setback of the last two years – depreciate the currency and loosen fiscal and monetary policy. This has been the answer produced by Britain, mercifully outside the euro thanks mainly to John Major’s brave, far-sighted and universally denounced decision to opt out of monetary union when he signed the Maastricht Treaty in 1992. But inside the euro, individual countries are stripped of the ability to manage their own economies. That is why the global recession has been far, far more devastating for some eurozone members than would otherwise have been the case – in just the same way that membership of the ERM inflicted wholly unnecessary damage on the British economy in the early 1990s.

Should we divorce the euro?

By David McWilliams, Sunday Business Post, January 10, 2010

Joining a currency union is the economic equivalent of a marriage. If a country decides to give up its currency and get into bed with another currency, it would seem ludicrous to entertain this move without being sure that the union was suitable. As we all know, there is a difference between fancying someone and making the thing last. To avoid single currency arrangements going sour, there is also a ‘matchmaker’ in economic theory. The economic matchmaker goes by the typically incomprehensible name of the ‘optimal currency area theory’. This theory is a checklist of economic attributes which need to line up in order for a monetary union to work. For a currency union to work for a country, the most important thing is that the country trades overwhelmingly with the other members of the monetary union. Like those Catholic fundamentalists who suggested that divorce would threaten the fabric of our society, the euro fundamentalists who run policy in Ireland suggest that, to leave the euro, would undermine the fabric of our economy. Like all fundamentalists, the thing they hate most is a sceptic. Lets hear it for the sceptics.

Still some never learn:

Former Mexican foreign minister calls for ‘North American union’, unified currency

Bloggers4UKIP report: EU flexes Lisbon muscle in Greece

The WSJ reports that the European Commission has said it will accept Greece’s plan to reduce its government budget deficit, but warned that further spending cuts and new taxes might be needed to fix the country’s public finances. According to FT Deutschland, the European Commission has put Greece under de-facto EU supervision.

Trade unions in Denmark have reacted strongly to suggestions that the Commission could demand pay-cuts in Greece, Danish paper Politiken reports. The FOA, a Danish trade union which represents most of the country’s public sector workers, has warned that the Commission’s demands could force the union to recommend a No vote in a future Danish referendum on euro membership. “That the EU intervenes in setting [national] wages is completely unacceptable”, Dennis Kristensen, head of the FOA, is quoted saying. The FOA has previously stayed neutral in referenda questions.

The Telegraph quotes EU Monetary Affairs Commissioner Joaquin Almunia saying the Greek targets will be enforced vigorously: “Every time we see or perceive slippages, we will ask for additional measures to correct these slippages. Never before have we established so detailed and tough a system of surveillance”.

The Guardian looks at the possibility of a Greek bail-out and quotes a senior official in Brussels saying, “For political reasons there can be no bailout, but the eurogroup can act with the Greeks to reform. We have a monetary union, a system for supporting the currency, interdependence.”

Die Welt reports on a study by the Cologne Institute for Economic Research, which favours IMF intervention as a solution for Greece, with a researcher quoted saying that “one could question whether EMU institutions have the necessary powers to persist and sanction budgetary discipline”, adding “it’s better that the IMF imposes disciplines on the indebted countries than that Eurozone countries fight amongst each other and political tensions emerge.”

Meanwhile, the FT reports that eurozone governments have borrowed a record €110bn from the markets so far this year, forcing up borrowing costs for those countries with the weakest public finances.

via Open Europe

Bundesbank President says EU assistance for Greece would be politically impossible

The Telegraph reports that Axel Weber, President of the German Bundesbank and a member of the ECB Executive Board, has said that any EU aid for Greece in response to its economic problems would be counterproductive. He told the German Boersen Zeitung financial paper, “Politically, it would not be possible to tell voters that one country is being helped out so that it can avoid the painful savings that other countries have made”. He added that such a bail-out “is not provided for and, as a general rule, I think such aid, whether it is conditional, or - even worse - unconditional, is counterproductive”.

EUobserver reports that ECB Chief Economist Juergen Stark said yesterday that the state of EU governments’ public finances could lead to further credit rating downgrades and market turmoil. The Commission is expected to give its assessment of deficit cutting measures in four EU member states - Hungary, Latvia, Lithuania and Malta - today. The FT reports that Portugal’s government last night unveiled its budget proposals for 2010 aimed at bringing the country’s budget deficit under control, which stands at 9.3% GDP in 2009.

Meanwhile, in an interview with Les Echos, ECB President Jean-Claude Juncker said “I have been arguing for stronger economic policy coordination within the Eurozone for many years, but I never managed to gain support from all Eurozone countries”. He added, “If we want to turn the Eurozone into an influential monetary, economic and political entity, then we must stop giving the impression that we focus only on budgetary consolidation. The time has come for us to set up an integrated strategy to get out of the crisis”.

thanks to Open Europe

Plus WHY EUROPEAN UNION IS NOT AN OPTIMAL CURRENCY AREA: THE LIMITS OF INTEGRATION

The Wall Street Journal stated on 21 January that the financial markets are unconvinced by the Greek government’s assurances that it isn’t seeking outside help from either the EU or the IMF with its public debt. Analysts said the government is moving too slowly to address Greece’s fiscal problems and investors are showing their disbelief by selling down Greek stocks and bonds. A Commission spokeswoman denied yesterday’s reports that the EU was preparing a loan for Greece, saying she wasn’t aware of any financial bail-out packages being arranged.

Die Welt features an interview with the Chief Economist of Deutsche Bank Thomas Mayer. When asked if he is worried about the euro, he answers “The situation is more serious than it has ever been since the introduction of the euro. The trouble in Greece plays a key role for future development.” When asked what the worst case scenario could be, he answers: “If the Greece situation is handled badly, the Euro-zone could break down, or suffer major inflation”.
He added that “Neither the European Central Bank nor the Commission nor any other EU body can force Greece to implement necessary reforms in exchange for help.”
Meanwhile, the Wall Street Journal notes that the euro has lost value and that “persistent fears about Greece’s fiscal situation have turned trade in the euro into a vote on the currency bloc’s credibility.” A new publication by Econ Journal Watch, entitled “It can’t happen, It’s a bad idea, it won’t last: U.S. Economists on the European monetary union and the euro, 1989-2002” looks at the experiences with the euro and its prospects.

source: Open Europe

Euroland’s revolt has begun. Greece has become the first country on the distressed fringes of Europe’s monetary union to defy Brussels and reject the Dark Age leech-cure of wage deflation.

By Ambrose Evans-Pritchard
(Telegraph, London, Monday 14 December 2009)

While premier George Papandreou offered pro forma assurances at Friday’s EU summit that Greece would not default on its £298bn (£268bn) debt, his words to reporters afterwards had a different flavour.

“Salaried workers will not pay for this situation: we will not proceed with wage freezes or cuts. We did not come to power to tear down the social state,” he said.

Were we to believe that a country in the grip of anarchist riots and prey to hard-Left unions would risk its democracy to please Brussels?

Mr Papandreou has good reason to throw the gauntlet at Europe’s feet. Greece is being told to adopt an IMF-style austerity package, without the devaluation so central to IMF plans. The prescription is ruinous and patently self-defeating. Public debt is already 113pc of GDP. The Commission says it will reach 125pc by late 2010. It may top 140pc by 2012.

If Greece were to impose the draconian pay cuts under way in Ireland (5pc for lower state workers, rising to 20pc for bosses), it would deepen depression and cause tax revenues to collapse further. It is already too late for such crude policies. Greece is past the tipping point of a compound debt spiral.

Ireland may just pull it off. It starts with lower debt. It has flexible labour markets, and has shown a Scandinavian discipline. Mr Papandreou faces circumstances more akin to those of Argentine leaders in 2001, when they tried to cut wages in the mistaken belief that ditching the dollar-peg would prove calamitous. Buenos Aires erupted in riots. The police lost control, killing 27 people. President De la Rua was rescued from the Casa Rosada by an air force helicopter. The peg collapsed, setting in train the biggest sovereign default in history.

Economists waited for the sky to fall. It refused to do so. Argentina achieved Chinese growth for half a decade: 8.8pc in 2003, 9pc in 2004, 9.2pc in 2005, 8.5pc in 2006, and 8.7pc in 2007.

London bankers were soon lining up to lend money (our pension funds?) to the Argentine state - despite the 70pc haircut suffered by earlier creditors.

In theory, Greece could do the same: restore its currency, devalue, pass a law switching internal euro debt into drachmas, and “restructure” foreign contracts. This is the “kitchen-sink” option. Such action would allow Greece to break out of its death loop.

Bondholders would scream, but then they should have delved deeper into the inner workings of EMU. RBS said the UK and Ireland have most exposure, with 23pc of Greek debt between them (mostly for global clients). The French hold 11pc, Italians 6pc.

Remember, Athens holds the whip hand over Brussels, not the other way round. Greek exit from EMU would be dangerous. Quite apart from the instant contagion effects across Club Med and Eastern Europe, it would puncture the aura of manifest destiny that has driven EU integration for half a century.

I don’t wish to suggest that Mr Papandreou - an EU insider - is thinking in quite such terms. Full membership of the EU system is imperative for a country dangling off the bottom of Balkans, all too close to its Seljuk nemesis. But Mr Papandreou cannot comply with the EU’s deflation diktat.

No doubt, EU institutions will rustle up a rescue. RBS says action by the European Central Bank may be “days away”. While the ECB may not bail out states, it may buy Greek bonds in the open market. EU states may club together to keep Greece afloat with loans for a while. That solves nothing. It increases Greece’s debt, drawing out the agony. What Greece needs - unless it leaves EMU - is a permanent subsidy from the North. Spain and Portugal will need help too.

The danger point for Greece will come when the Pfennig drops in Berlin that EMU divergence between North and South has widened to such a point that the system will break up unless: either Germany tolerates inflation of 4pc or 5pc to prevent Club Med tipping into debt deflation; or it pays welfare transfers to the South (not loans) equal to East German subsidies after reunification.

Before we blame Greece for making a hash of the euro, let us not forget how we got here. EMU lured Club Med into a trap. Interest rates were too low for Greece, Portugal, Spain, and Ireland, causing them all to be engulfed in a destructive property and wage boom.

The ECB was complicit. It breached its inflation and M3 money target repeatedly in order to nurse Germany through slump. ECB rates were 2pc until December 2005. This was poison for overheating Southern states.

The deeper truth that few in Euroland are willing to discuss is that EMU is inherently dysfunctional - for Greece, for Germany, for everybody.

Euro membership blocks every way out of Greek debt crisis

In the Telegraph, Ambrose Evans-Pritchard notes that “Greece is disturbingly close to a debt compound spiral. It is the first developed country on either side of the Atlantic to push unfunded welfare largesse to the limits of market tolerance.”

He adds: “Euro membership blocks every plausible way out of the crisis, other than EU beggary. This is what happens when a facile political elite signs up to a currency union for reasons of prestige or to snatch windfall gains without understanding the terms of its Faustian contract.”

When EU-critics were warning of the problems of the Optimum Currency Area EU was planning new conquests.

Now the fit hit the shan.

Star Wars XXXIV: Empire strikes ze pirates

This initiative clearly demonstrates the Empire’s determination to combat criminal acts.

Op ATALANTA will involve six warships and three surveillance aircraft with contributions expected from the provinces of Britannia, Frankia, Hellas, Hispano, and Germania, patrolling a million square lightyears of the Indian Galaxy and Rings of Aden where pirates have captured several vessels and taken numerous hostages this aeon alone.

Every country for itself as European unity collapses in an attack of jitters

Germany became the latest EU member to put its national interest first by announcing its own guarantee for bank deposits

Roger Boyes for TIMES ONLINE - whole article here

Germany shattered any semblance of European unity on the global credit crisis last night by announcing that it was ready to guarantee €568 billion of personal savings in domestic accounts.

The move – which came as Berlin announced a new rescue package for an ailing mortgage bank – is sure to anger France which, holding the European Union presidency, tried to create the illusion of a common front at a weekend summit in Paris. Instead, the message coming loud and clear from Berlin is that it is every man for himself. Or as President Nicolas Sarkozy would prefer not to say: sauve qui peut.

The massive liquidity crisis in the banking system has already nudged the Irish Republic and Greece into unilateral – and probably illegal under EU law – action to guarantee the deposits in national banks. Faced with a choice between the possible collapse of their banking systems and violating EU competition rules, the two countries opted for what they saw as the lesser evil. Now Germany, which at the weekend rejected French plans for an EU lifeboat fund, has taken the decisive protective step, and it is said to be plain that other European states will have to follow suit.

Those critics of Euro (€) of which one of the strongest has always been TEAM’s long-time member The Bruges Group who have based much of their convictions on the rather hidden cracks within the “Optimum currency area theory” have also kept clear mind about the long term prospects of the Euro-zone.
Here is one of their excellent papers titled Is Europe Ready for EMU? Theory, Evidence and Consequences.
One of the basic structural criterions of OCA theory which at first has not been emphasized enough has later been graded as more relevant. Here is a short .pdf presentation from the year 2005 (this one not from The Bruges Group but much more favourable towards Euro) from which we’ll quote some interesting details:

The “New” OCA Theory

Focuses primarily on political issues of forming a currency union:

• Fiscal Transfers
• Homogenous Preferences
• Solidarity

Homogeneity of Preferences Criterion

• Common view on how the ECB reacts to (symmetric) shocks
• Problem:
  – Every country wants to put its interests before those of the member states, jeopardizing the CU

Solidarity Criterion

• Solidarity among the member states has to outweigh national interests
• Problem:
  – Solidarity is only easy in “golden years”

Even though the authors of this presentation have predicted bright future for the Euro the word “Solidarity” or rather the lack of it in these days discloses much more than it should for the Europhile political elites.

Below are some of the videos posted to Youtube from countries across Europe thanking the Irish people for voting no to the Lisbon Treaty:

Netherland:

Great Britain:

Germany:

Poland:

Greece:

It just had to happen. Finnish, Estonian and Greek parliaments have today proved for the last time before the Irish spectacle that current European national political elites have flown far, far away from their electorates.

Shame on them, shame on us for having such representatives.

A large majority of Finnish deputies – 151 out of 200 – on Wednesday (11 June) voted in favour of the document, while 27 opposed it and 21 were absent, according to AFP news agency.

A little later on Wednesday afternoon, the Estonian parliament also approved the Lisbon treaty. Its vote was almost unanimous: 91 votes in favour and one against. Nine MPs abstained.

The Greek parliament ratified the Lisbon treaty with 250 to 42 votes late on Wednesday, just hours before Irish citizens vote on the document. With Greece, 2/3 of EU states have started or completed the treaty’s ratification.

More on that in EUobserver.