The euro selloff against the dollar “showed the strain of efforts to force through austerity policies and impose tough new spending rules.”
Moreover, concerns emerged among at least four non-euro countries over whether legal considerations would force them to join Britain and opt out.
Czech Republic Prime Minister called the Brussels deal little “more than a blank sheet of paper….I think that it would be politically short-sighted to come out with strong statements that we should sign that piece of paper.”
Irish Prime Minister Enda Kenny said a referendum at this stage would fail. An unnamed Brussels diplomat wants “some clarity on what this treaty might include. There are so many unanswered questions,” he added.
In fact, there’s lots more troubling than he explained. Moreover, nothing from Brussels augurs well for working households across Europe. More on that below.
Nonetheless, other countries also expressed concerns, including Hungary and Sweden, saying they won’t relinquish control of their corporate tax policy. What about their people policy? Only harder than ever hard times are planned.
Italy’s opposition Northern League expressed strong disapproval of a deal they called a “holdup,” not a budget.
Munich’s Ifo think tank cut its 2012 German GDP forecast, saying:
“The dependency of economic developments on the decisions made by Europe’s politicians complicates the forecast considerably by making radically different plausible scenarios possible.”
In other words, bad decisions assure bad results. At issue only is how bad at a time weak Eurozone countries are heading south, and nothing’s being done to stop it.
Greece looks vulnerable to bankruptcy, exiting the Eurozone, and devaluing its currency massively. Signs point clearly in those directions. In the past year alone, capital flight lost 40 billion in deposits, equal to 17% of GDP.
In fact, over 30% of it exited in September and October alone, signaling lots more to come. Troubled Greece is Europe’s canary in its coal mine. Its economies aren’t close to resolving enormous debt, growth, and other structural problems.
They’re getting worse, not better. Expect 2012 to show bad conditions deteriorating. The short, intermediate and longer-term outlooks look dire.
On December 14, FT writer Ajay Makan headlined, “Dive in deposits at foreign-owned banks in US,” saying:
“Foreign-owned banks (in America) suffered their largest six month fall in deposits on record.” Analysts call it a “flight to safety.”
Deposits fell $291 billion, or 25%, from end of May to December 1. US banks benefitted. Whether the trend continues bears watching. Clearly, it shows heightened European risks, and what happens there spreads globally.
On December 13, FT’s Martin Wolf headlined, “A disastrous failure at the summit,” saying:
“Whom the gods wish to destroy they first make mad. That was my reaction” to last week’s summit. EU leaders failed “to devise a credible remedy for the ills of the currency union.”
Instead of focusing on economic growth, they proposed “tighten(ing) the screws on fiscal deviants” when stimulus is needed.
What Germany’s Merkel and France’s Sarkozy called a “stability and growth union,” Wolf describes as “instability and stagnation.”
In fact, few details emerged in Brussels, except to say “general government budget deficits shall be balanced or in surplus: this principle shall be deemed respected if, as a rule, the annual structural deficit does not exceed 0.5% of (GDP.)”
Second, “such a rule will also be introduced in member states’….legal systems. The rule will contain an automatic correction mechanism that shall be triggered in the event of deviation.”
In other words, fines, sanctions, and/or other measures will be imposed – supposedly. However, doing so depends on most member states agreeing. Wolf said he’s “unconvinced that turkeys will vote for Christmas.”
They haven’t before and won’t now let unelected bureaucrats impose harmful measures. So “(w)hat is the (European) Commission going to do if they still fail to comply? Take them over? The answer (supposedly) is: yes. This is a constitutional monstrosity.”
It’s also an economic one driving nails into a failed system. Hammering weak economies with fiscal austerity assures weaker ones heading for implosion.
Nonetheless, Wolf sees Europe adopting an “orgy of fiscal austerity” besides much more already imposed. As a result, expect deeply troubled countries to face “long-term structural recessions,” or to “put it bluntly,” he says: “the single currency will come to stand for wage falls, debt deflation, and prolonged economic slumps.”
Wolf didn’t explain that working households across Europe, America, and elsewhere suffer most to assure bankers are paid, instead of holding these bandits accountable for the crisis they created, nationalizing insolvent ones, or shutting them down altogether.
Given numerous failed summits and destructive policies overall, the Daily Bell asked if planned euro collapse is planned. “The chaos is as undeniable as it is undesirable,” it says.
EU and other Western nations support “the idea that increased centralization and globalization are necessary in the modern world.”
The notion is wrongheaded and destructive, but their agenda plans world government down the road. What’s in play now perhaps is part of this larger trend. Strategically they hope creative destruction can produce order on a grander scale.
“The EU – and its euro – is failing. The Anglosphere elite that set it up in the first place will either try to salvage it as it is or will use the chaos from the breakup to pursue its goal of a more perfect global union.”
“It is as likely, in our humble view, to founder entirely as it is to continue as an organized political entity.” As a result, global power brokers will fail, not succeed. Chaos is very risky strategy. Instead of order, collapse perhaps is coming.
Progressive Radio News Hour regular Bob Chapman agrees, but believes throwing money at the problem can delay final resolution. At the same time, the longer bad policies persist, the greater the eventual upheaval with profound global implications.
Major economies are growing weaker. Europe’s in serious trouble. So is China, but manipulated data conceals it. Its Shanghai index, however signal’s trouble. It hit its lowest level since March 2009 when global equity prices bottomed out.
Moreover, in recent years, China’s been a key worldwide equity leading indicator. Expect other markets and economies to follow its pattern that’s decidedly heading south.
In fact, recession already is biting Europe. Moreover, in six or more troubled economies, conditions are dire, especially in Greece, Italy, Portugal and Spain, but expect others to follow, including Britain and France. Even powerhouse Germany isn’t immune as downturn gains momentum across Europe.
In addition, emerging countries like India, South Africa, Brazil, Russia, and others are slowing dramatically.
Like the Daily Bell, Chapman wonders if EU strategy is “to break up the euro zone and the EU, (perhaps as a prelude to) world government. We know that since WWII that the internationalists have been setting up Europe as the foundation for world government,” despite unreported popular opposition.
He saw trouble coming years ago and said so. He believes Britain opting out last week “cast the die and now Germany must respond. It is either let’s make a deal or the EU and the euro zone break up. Who knows, perhaps that is what Germany is after” to consolidate greater power for itself.
Chapman’s on these issues daily and through his twice weekly International Forecaster. It’s an invaluable source of key information suppressed by major media scoundrels when they finally learn some of it weeks or months after Chapman reveals it in print and on air. He does it regularly on the Progressive Radio News Hour.
Hard Times for European Households
When the going gets tough, workers suffer most. Millions across Europe face growing austerity burdens when massive stimulus is needed.
As a result, jobs, decent wages, social benefits, and living standards are eroding dramatically. Youth unemployment is skyrocketing. In Greece, Spain and elsewhere, it approaches 50%. Total US unemployment approaches 23% en route to higher levels.
Bankers, other corporate elites, and complicit politicians are capitalizing on crisis conditions to mandate social injustice at a time help is badly needed. Instead, painful cuts come in successive waves.
Europe, America, Israel, and other industrialized economies are third worldizing. In response, rage affects hundreds of cities for change. America’s OWS says “the only solution is World Revolution.”
Governments won’t help, so people on their own must sustain long-term struggle for change, no matter what’s done to subvert them.
Global crisis conditions today are the gravest in decades. Ameliorating programs earlier helped.
Today’s destructive ones favor bankers, war profiteers, and other corporate favorites. Only people power can turn disaster to social justice.
Popular Middle East outrage, America’s OWS, Greece’s Oxi, Spain’s indignados, Chilean students, and cross-polinating populations across other countries need critical mass power to succeed.
Fundamental change is possible. The mother of all struggles lies ahead. Sustained resistance gets results. Given the alternative, is anything less than social justice acceptable?