The EURO – Increasing social injustice in Europe since 1999.
Today, 19 countries share the Eurozone countries and six non EU member nations, across widely different economies. Right now, the makeup of the Euro currency nations, looking broadly like this:
- Andorra (non EU)
- Austria
- Belgium
- Cyprus
- Estonia
- Finland
- France
- Germany
- Greece
- Ireland
- Italy
- Kosovo (non EU – Debated nation status)
- Latvia
- Lithuania
- Luxembourg
- Malta
- Monaco (non EU)
- Montenegro (non EU)
- The Netherlands
- Portugal
- San Marino (non EU)
- Slovakia
- Slovenia
- Spain
- Vatican City (non EU)
What you might notice jumping out at you, is that these countries have a massively different economic position. There are very few of them doing very well and a significant majority doing far less well.
Yet, they all share the same currency. Which means, that they do not control their currency, depriving them of vital economic tools to manage a downturn or improve their economic outlook. They cannot leverage deficit spending in their own right. They cannot set a fiscal policy which supports their particular economic environment. Which means that a policy that is set centrally, can be extremely detrimental.
Take Germany, for example. Germany benefits from the fact that the majority of other nations in the Eurozone are not doing so well. This keeps the value of the Euro relatively low. Vastly lower than an independent German currency would be. This in turns helps grow the German export economy.
‘Freedom of movement’ acts as an agent of instability, particularly in terms of the way in which it acts upon the Eurozone. Of course, when you have a country doing far better than others and free movement between them across what happens?
Of course, everyone starts to leave those poorer economies. Often starting with the best and brightest. Which ensures that it is extremely unlikely that those countries ever achieve parity with the richer nations because the labour and skills that they need to do so are slowly draining away. In some cases it has been more of a flood. So the wealthier country benefits from a sort of currency fixing from an undervalued currency, vastly reduced labour cost, and also benefits from the capital of ideas and IP from those poorer nations which are not in a position to kick start their economies.
However, this is where secondary social effects begin to manifest. Increased competition for labour and stress on social services, reduces the benefits to low paid and out of work members for society. Wage attrition begins to occur as ultimately, the labour market will naturally seek equilibrium with the poorer nations for those same positions. Many economists argue that this is no accident and that the EU is intentionally engaging in this wage attrition exercise to aid their largest corporations. Companies like, Audi , Siemens and others which benefit from wage attrition, increasing their ability to sell more cars or product, in markets such as China.
Currency related methods which a government would normally be able to put into effect to try and reverse this tide are unavailable to a Eurozone economy. Naitonal initiatives such as running a temporary deficit economy for a period of time and investing in key infrastructure and initiatives along with a host of other typical methods of addressing these challenges are no longer an option.
In other words, the only answer, is the inevitable conclusion of monetary union as it is within the Euro zone. Which is Austerity. Austerity harms the poorest in society the most and is one of the only things many governments can do, indeed MUST do in order to stay within the requirements of the Eurozone itself. It is a vicious circle which is an almost inevitable conclusion of monetary union across a widely disparate range of nations and economies.
Many citizens suffering the effects of austerity in Europe believe that it is their national government to blame when in reality, that is only half the story and may not even be that.
So where does all this lead? Europe has seen plenty of enormous bailouts of the financial system to the point that there would be very little support for more. Yet during the Euro Crisis which went from 2007 to 2016 in some countries and many would argue, continues to this present day governments needed more money injected into German banks in particular. Banks were bailed out in the early stages but more was required. How to inject money into some of the worlds most overcapitalsed banks which though suffering badly from poor decision making due to under regulation and instability across the Eurozone, had to be saved or to allow the possibility that German economy to go down with them. Something which would signal the end of the European Project entirely.
The solution; If we cannot afford the public perception of another bank bailout in the Eurozone, why not bailout a whole country. Fortunately, a victim already presented itself. In the form of Greece.
95% of the money paid by European Taxpayers to Greek Bailout funding went into the Greek balance sheet then directly back to various banks. This was a banking bailout hidden behind a national bailout to cover poor decision making. Who did it benefit? The banks and certainly not the European Citizens paying for it nor the Greek people who suffer the consequences to this day, and will be for generations.
These seemingly ludicrous decisions were not made so simply as it may first appear. Because decades of ideologically led, poor decision making , had crippled the Euro Zone financial system the banking system in Europe was out of control. Particularly in Germany where banks had a ratio of risk weighted assets to total assets of only 22.3%. This was a third that of US banks at the time and about a 25% less than other EU banks. They were out on the screaming edge of high risk and set to take the German economy over the edge with them. German banks needed more money. The citizens of Europe, didn’t want more banking bailouts and instability. After all, they might question the competence of the entire leadership of the whole EU project and ideology behind the European Commission, whose stance has always been that the project Kalergi started must continue at all and any cost.
So, rather than try long term fundamental reform involving better regulation of markets and the banking system, which would have by then been too late, as the Euro zone was left with ridiculously over capitalised banks, they came up with a less obvious and more Machiavellian solution. Greece, conveniently provided the means. One wonders if the Troijka might have come up with a scheme to bring about a need for a national bailout directly if one had not so conveniently to present itself.
We are left with a situation where, rather than deal with the real issue, the poor regulation of the banking system combined with the ideological ambitions of the EU, exacerbate a fundamentally unsustainable currency union. The European Union opted to avoid the issue entirely and simply put it off. So the instability in the system remains.
So where does that leave the ordinary people working in Europe today? Of course, the corporations and employers want workers and they want them as cheaply as they can get them. The existing workers themselves want to maintain a standard of living or in most cases, see it improve, two juxtaposed positions. Free movement and the Euro ensures that these rather reasonable ambitions of many European people are simply impossible and people are starting to notice.
So what has happened in European policy, to help ordinary people maintain a reasonable quality of life and prosper despite living within an unstable currency union?
In true European Union fashion, they doubled down on the gamble. Much like an out of control investment banker, they took an even greater risk to try and keep their project going.
They found even poorer regions of the world and invited these people to come to Europe as well, North Africa, the Middle East and beyond. To such a degree that now two continents at least are seriously, destabilised and due to the extreme wealth disparity, the EU have begun to recreate, to all intents and purposes, what will become the largest slave trade the world has ever seen.
The impact on European Citizens is going to be beyond all precedent and any prediction of the full social, economic and cultural cost involved is incalcuable.
This is social engineering on a scale the world has never seen. That ordinary people will suffer even worse conditions as wages continue to suffer overall attrition or at some point, even simply crash below current survivability level seems likely. Higher unemployment, vastly higher crime and ever decreasing social cohesion seem almost inevitable.
We will be told, this is the new baseline and it is our own fault because we simply got used to an unsustainable quality of life while the rest of the world was living in poverty. But the people telling us that, will not be those that have to live with the consequences of their decisions. They will, by then, be unaccacountable, irremovable and beneficiaries of the death of Europe. The EU monetary and financial policy is leading us to a cliff edge and could throw away 1000 years of social development and it will be the poor and then the working class that pay the price.
The working class and poor in many countries already starting to see the reality as cuts in social services and competition for health and education become a factor. Society is divided more than ever before and wealth disparity is already increasing more rapidly than ever between the people and the ruling elite.