EU Will Fail Upwards Until it Really Fails

Just in from The Daily Bell - Thursday, February 11, 2010 - by Staff Report

This week's summit of EU leaders in Brussels rapidly evolves from a policy workshop into an historic gathering that may catapult the EU across the Rubicon towards fiscal federalism and a de facto debt union. The EU's top brass are seizing on the crisis to push for a radical extension of EU powers, saying Greece has exposed the deep flaws in the structure of monetary union. Herman Van Rompuy, the EU's new president, has submitted a text calling for the creation of an "economic government" that shifts responsibility for economic planning from national authorities to the "EU level". In a parallel move, Commission chief Jose Barroso said Brussels has treaty powers allowing it to take the reins of economic management. " This is a time for boldness. I believe that our economic and social situation demands a radical shift from the status quo. And the new Lisbon Treaty allows this," he said. - UK Telegraph

Dominant Social Theme: Having failed, the EU must acquire more powers.

Free-Market Analysis: The European Union, like Frankenstein's monster, is not about to die again - or not if its leaders can help it. Every crisis, every mis-step, every unworkable solution only provides those running the EU with additional reasons why the EU should obtain more power. It is a classic case of failing upward, and a cynical one as there is ample evidence that those who founded the EU always expected that serial crises would present themselves as an opportunity to create an ever-closer union.

Now, as the Greek dilemma presents itself, we can see from the point of view of the EU that the problems of Greece provide ample justification for the creation of a far more powerful EU entity, one that includes "economic government." Presumably what this means is that any serious governmental actions regarding a member nation's finance would have to be vetted and approved by EU higher-ups. Not only that, but the EU commissioners such as Barroso are already mustering the argument that they have the authority to take over due to the "new Lisbon Treaty."

The Lisbon Treaty is actually the warmed-over remnants of the massively authoritarian constitution that EU bigwigs tried to ram down the collective throat of the EU - a fraud so evident and repulsive that even the citizens of France voted against it (though one of their own politicos, Giscard d'Estaing, was its main author.) The problem with the EU is in fact the problem with its former constitution - the rights that citizens have are provided by the state and may be redefined by the state or taken away altogether as the bureaucracy sees fit. Contrast this to the US Constitution, which clearly states that citizens' rights are ordained by a creator and cannot be redefined or removed. (Of course they have been, but not legally so.)

The American Constitution is a fairly abbreviated document providing a clear (if general) statement about the powers of the Federal government (only the powers stated IN the Constitution are available to the US FedGov) whereas the EU constitution - not adopted - is an abysmally bloated and rhetorically bankrupt document, every word of which reveals the crookedness of the minds and motives of those who wrote it. And yet, like Mary Shelley's undead monster, the EU continues to expand, as its major players scramble to support the union no matter the cost. Here's some more from the article:

Michael Meister, parliamentary chief for Germany's Christian Democrats, said the crisis could not be allowed to drag on. "Our top priority is the stability of the euro," he told FT Deutschland. "Should Greece receive help, it will only be under tough conditions and if the Greek government undertakes root-and-branch reforms."

Germany's apparent backing for a bail-out comes despite worries that it will lead to the breakdown of fiscal discipline across the Club Med region. It also raises troubling questions of fairness. Ireland has tackled its own crisis by slashing wages and going far beyond any measure so far offered by Greece, yet Dublin has not received help.

Germany's dramatic shift in policy changes the character of the euro project. It follows weeks of soul-searching in Berlin, and after increasingly loud pleas from Brussels, Paris and southern capitals. The deciding factor was concern that letting Greece fail risked a "Lehman-style" run on Club Med debt, with systemic spill-over across Europe.

Greece and a number of other "weaker" countries joined the EU even though their governments were spending too much, to the point where trends hinted at eventually unmanageable debt loads and thus default. We recently read a fascinating portrayal about how EU funds, meant to support Greek economic expansion were simply funneled off into private accounts. The marinas, land-based infrastructure and other elements of an expanded Greek economy were contracted for but never built. And thus what was on the surface supposed to be a methodology supporting Greek expansion turned into what can only be characterized as a series of bribes.

Of course Greece joined the EU - the power structure of the country, its biggest construction and tourist businesses, along with the political class, would likely have done almost anything to get their collective hands on so much free dough. And we have to assume that this animating feature of Greek cooperation is a mechanism that was repeated over and over with many other EU countries.

Those orchestrating the steady expansion of the European Union seem confident that serial crises will continue to consolidate power at the federal level. But when we look closely at how this will work, we end up with the idea that first Greece and then many other of the weaker countries in the EU are doomed to a kind of grinding and endless cycle of budget cuts and rate increases that will make it difficult for a vibrant economy to emerge for any length of time.

Greece, Spain and many other countries of the EU therefore seem destined to experience the worst that federal control of money and economic power has to offer. Some kinds of government will be substantially trimmed back, but massive government programs, in all their corruption and waste, will remain. The central banking system will remain in place, with all the ruin that proposes, but rates will rise to a point that they will not be affordable except for larger corporate entities. Gray and black markets may flourish as the economic picture gets more and more distorted.

All of this is expectable and will likely occur. But we think once the reality of what the EU is becoming is clarified by an endless, grinding recession/depression, the citizens of many of the weaker EU states will simply decide that they will not participate anymore. The trigger will be the bad times, but the information that puts it into perspective will be provided by the Internet - which must certainly be more and more ubiquitous in Europe as it is in America. And, yes, this phenomenon is already observable in the States. The information on the corruption and ma lfeasance of the system has been available on the ‘Net for years, but it took a poor economic environment to concentrate people's minds and make the information relevant.

Because of our focus on the Internet as a modern-day Gutenberg press, the Daily Bell remains one of a few publications predicting with some confidence that eventually there will be vast changes in the economic and legislative environment of the United States. We believe this will occur as citizens fully understand the ramifications of the money system and security apparatus that has grown up around them in the past 100 years. We believe the same process will take place in the EU - especially as the EU is less rooted than the American system.

Conclusion: We have suggested that readers hold at least some physical gold and silver as a result of potential monetary upheaval, but the ramifications of what may occur will likely touch aspects of people's lives beyond the economic ones. When we look at the pace of change, it seems to us that the power elite is beginning to struggle and that it is gradually losing control of the rhetoric and various foundational mechanisms that previously gave society its cohesion. We don't think this is a bad thing by the way. We could, in fact, compare it to Narnia in some aspects, after the long winter when the land began to bloom once more and the Lion roared.