Wednesday, December 01, 2010

The FT begins to have doubts

When Martin Wolf of the DG FTstarts saying things like this,
The Eurozone's political glue may be about to melt
then the waters in Brussels are getting very choppy indeed, he is talking about the variety of structural problems that are currently besetting the Eurozone, and the existential threat to the European Union project as a whole. It is almost as if he has had a damascene conversion and joined UKIP overnight. At least his economics seems to have done. It is all about the ability of currencies to float, pan national interest rates being damaging, the whole nine yards.

This is his summing up,
So the big question now is not whether the eurozone can avoid a wave of fiscal cum financial crises. The question is whether the union will survive. The article this week by José-Ignacio Torreblanca of the European Council of Foreign Relations in Madrid, with its complaints about German attitudes, suggests the answer might be: no.

This is a political more than an economic issue. It is possible for a currency union to survive sovereign defaults. The question is, rather, whether members believe the arrangement remains beneficial. The difficulty for surplus countries is that they must finance those in deficit, accept external adjustment or push the eurozone into external surplus. The difficulty for deficit countries is that the cost of leaving the eurozone is to face debt crises. If those have happened already, the costs will seem smaller. If they think they have replaced currency crises with credit crises, which do not even restore competitiveness and growth, they may see the union as a bad deal. Political glue could melt. Such calamities do happen. It is now up to the members to see that they do not.

2 comments:

Anonymous said...

There is a problem with the EU collapsing before the LibLabCon are entirely discredited by association with it.

As we know, the Progressive/Marxist society that those parties have created and would perpetuate in an independent UK will be a disaster. We need the EU to last long enough so that it can act as the crucible in which the era of Gramscian culture-creep and anti-British misrule is purged. The LibLabCon needs to go down with the EU ship, or else, being the pirates that they are, they will just find another warship.

paulsc said...

Anonymous, I am very interested in what you have to say but what do you think will replace the LibLabCon? Forgive me Mr Towler, but following a collapse of the EU won't most voters consider UKIPs work done and, if so, who else is there?

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