Europe

From One Debt Bubble to Another – Europe is Rrunning out of Ideas

0 8

Written by DEAN CARROLL

Friday, 21 October 2011 08:15

europe_flagMany are holding their breath in anticipation that the eurozone summit on Sunday will result in an all-dancing, all-singing solution to fix the problems of the single currency – once and for all. Given the track record of snail-pace progress at these set-piece events, it seems unlikely. Germany has already said as much before the first word is spoken, in an attempt to downplay expectations. In fact, there is a risk that even a pumped up European Financial Stability Facility – with some economists and politicians suggesting a figure of €3 trillion will be necessary – would be a mere sticking plaster.

After all, we have previously moved the debt from the infamous NINJAs – no income, no job or assets – as the Americans call them, who were granted mortgages they could not afford, then on to the balance sheets of the banks – themselves recapitalised almost to the extent of nationalisation – meaning that the transfer of that debt to sovereign states was the final resting place, until now. Of course – problems of corruption, tax avoidance and mismanagement of public finances, in nations like Greece, and trader greed in financial services’ centres like the UK quickened the decline.

But do we really think that moving the debt one more time to a collective European fund will solve the problem? Especially, when you consider that – aside from Germany – European Union member states do not really have a surplus of cash to back such a fund, even in guarantee form. France, with its own severe debt problems, cannot hope to match any German financial support and the UK has no intention of contributing more than it has to through the International Monetary Fund. Inevitably, if the necessary money is eventually found, it is likely to come from the emerging powerhouse economies. Last weekend, at the G20, we saw murmurings of this when the BRICs – Brazil, Russia, India and China – looked at setting up a rescue package within the IMF, having tired of waiting for Europe to get its own house in order.

In the British newspaper The Times today, UK Tory peer Lord Wolfson has put up £250,000 of prize money for anyone, who can find an answer to the European debt crisis. He says: “There is now a real possibility that political or economic pressure may force one or more states to leave the euro. If this process is mismanaged it could threaten European savings, employment and the stability of the international banking system. This prize aims to ensure that high-quality economic thought is given to how the euro might be restructured into more stable currencies.” Applicants to the “Wolfson Prize” have until January to submit a 25,000-word blueprint. They say that desperate times call for desperate measures, but by January it may be too late.

In more bad news dispatches today, a two-day general strike was launched in Greece and Moody’s became the last of the “big three” rating agencies to downgrade Spain this month. Meanwhile, the EU has trumpeted its announcement of a ban on credit default swaps on sovereign bonds – or “naked” short-selling – as if it were the panacea to all of the problems faced by Europe. It is far from that. The ability for national regulators to suspend the moratorium remains in place and the ban will not come into effect until November 2012. Another “fudge” you can just hear the critics shout from the sidelines.

Despite the European commissioner for the Internal Market Michel Barnier’s claims that the measures “will ensure that sovereign CDS are used for the purpose for which they were designed – hedging against the risk of sovereign default, without putting at risk the proper functioning of sovereign-debt market”, it does feel distinctly like tinkering at the edges. In truth, what Europe needs right now is collective and radical leadership that recognises the continent’s weakened position and speaks with one voice to the emerging economies, which hold our future in their hands.

cesran_logo_1_2Published at PublicServiceEurope.com

About the author / 

CESRAN Int.

Leave a reply

You must be logged in to post a comment.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

CESRAN Blog

  • 24th Issue is Online Now!

    Vol. VI | No. III – July-August-September 2020 To Download the Magazine Click Here… CONTENTS 05-14….. World News by Ebru Birinci 17-24….. Preparedness for an Uncertain Future “The Only Thing We Have to Fear is Fear Itself” by Professor Mark Meirowitz 25-39….. EU LAW vs UK LAW The Primacy of EU Law over National Law:…

  • IEPAS2020 is Going Virtual!

    Dear Friends and Colleagues, IEPAS2020 is Going Virtual! Due to the COVID19 pandemic, we are holding our entire conference virtually by streaming all of the live sessions. You may participate in all of our virtual networking events. In case of missing a session, you may get full access to the replays of every session since all…

  • The 13th issue of JCTS (Journal of Conflict Transformation & Security) is out now…

    The 13th issue of JCTS (Journal of Conflict Transformation & Security) is out now… Vol. 8 | No. 1 | 2020 Click here to Download the Entire Issue   TABLE OF CONTENTS Editor’s Note By David Curran Introduction By Nergis Canefe Research Articles Statelessness as a Permanent State: Challenges to the Human Security Paradigm By…

  • The 19th Issue of The Rest: Journal of Politics and Development is Out Now!

    The 19th issue of the rest: journal of politics and development is out now. Download the issue here… TABLE OF CONTENTS Research Articles Turkish AK Parti’s Posture towards the 2003 War in Iraq: The Impact of Religion amid Security Concerns By Alberto Gasparetto Nigeria and the Great Powers: The Impacts of the Boko Haram Terrorism on…

  • CESRAN International Named again amongst the Top Think Tanks in the World

    CESRAN International is pleased to announce that it has been named again amongst the world’s best think tanks. The 2019 Global Go To Think Tank Index ranked CESRAN International 141st among the World’s “Top Think Tanks in Western Europe” 75th among the World’s “Top Environment Policy Think Tanks” 153rd among the World’s “Top Foreign Policy…

  • THE 18TH ISSUE OF THE REST: JOURNAL OF POLITICS AND DEVELOPMENT IS OUT NOW.

    The 18th issue of the rest: journal of politics and development is out now. Download the issue here… TABLE OF CONTENTS Research Articles The Foreign Policy Decision Making Approaches and Their Applications Case Study: Bush, Obama and Trump’s Decision Making towards Afghanistan and the Region By Sharifullah Dorani Evaluating the Explanatory Power of Social Identity Theory,…

Newsletter