Courtesy of The Automatic Earth
The German edition of Der Spiegel opens the new week on Monday morning with a series of articles on the European situation, which make clear, as if that were still necessary, that Europe is still an absolute mess. You know, just in case you thought it was not. That Mario Draghi's latest unlimited whatever it is had somehow chased away the demons.
First, Der Spiegel writes that the Greek deficit is twice as high as previously thought,, at €20 billion, according to a preliminary version of the long awaited troika report. The gap has to be closed for the next tranche of bailout money to be paid.
Second, eurozone countries plan to let the ESM balloon to over €2 trillion ($2.6 trillion). Remember that the German Constitutional Court limited Berlin's part to about €119 billion recently. Creative accounting to infinity and beyond. The efforts to keep the union together will blow it apart.
Third, former German FInance Minister Steinbrueck works on a banking plan that would split up investment and retail activities for Germany's banks (including Deutsche), think Glass Steagall. He wants to ban commodities speculation. And he wants a bank-ESM, a fund paid for by banks that can be used to bail them out, rather than taxpayer money.
There's lot more going on, and going wrong, in Europe, no matter what Draghi does, and no matter what plans José Manuel Barroso unveils. When I saw that the latter was seriously talking about establishing a European army, I couldn't help thinking: will it bring all those translators to the battlefield too?
Europe is not a country, it is not a culture, and it is not a language. It is a loose union that consists of many of each. Europe can hold together in times of plenty, and it will fall apart in meagre times. The only thing Europeans have power over – to a degree – is how the process of unravelling will unfold; they can't stop the process. The present attempts to hold the union together at all costs will be extremely costly, they have zero chance of succeeding, and they will lead to violence. The alternative, an attempt to live together as good and peaceful neighbors outside of a currency union, is not even considered. And I'm pretty sure it won't be until it's too late.
Hedge fund king Ray Dalio last week expressed the same fears I have been hammering on for months now, see for instance Project Europe is Over, Dear Angela, It's Time To Do The Right Thing and A Big Bad Brick Wall. I will always be reluctant to evoke Hitler's name, because it will inevitably be interpreted by many people as over the top fear-mongering, and because of the WWII survivor stories I grew up with, but the principle remains the same. A few weeks ago, I finally did resort to using the name, for the simple reason that in my view the threat in Europe is growing by the day:
Europe is creating conditions – of misery, poverty and hopelessness – in a number of its member states [..], that are not unlike those that provided the space needed by the likes of Hitler and Mussolini to rise to power in the 1920s and '30s. And that is a grave danger.
Now, Dalio says this:
RAY DALIO: I don't know whether we're beyond the point of being able to successfully manage this. And I worry then about—social disruption. I worry about—another leg down in the economies—causing—social disruptions. Because deleveraging—can be very painful, it depends how they're managed.
But when people—get at each other's throat, the rich and the poor and the left and the right and so on, and you have a basic breakdown,that becomes very threatening. And for example, Hitler came to power in 1933, which was the depth of the Great Depression because of the social tension between the factions. So I think it very much is dependent on how the people work this through together and worry about the social elements.
I can only hope that more people wake up to this, and that the people who lead the continent into these dangers will be relieved from their positions before they can do more harm. Hey, I can hope…
Still: "How the people work this through together"? They obviously don't. It's one-way traffic all the way. Conditions and demands are imposed upon people who have no say in how their politicians, elected or not, react to them. It's the bullies vs the bullied, working all the way down the chain of command.. The troika bullies Spanish PM Rajoy, and he turns around and tries to bully Artur Mas, the President of Catalunya.
And as long as the IMF is allowed a seat at the various tables from which it can demand and impose, that is not going to change. The Fund's "reform" demands, based on Milton Friedman's Chicago School shock capitalism, tried, tested, and fine-tuned in South America, Asia and Eastern Europe, are still the sole religious mantra. These days, that is true for the EU as much as for the IMF, as I documented in Hungary Says The IMF And EU Want To Make It A Colony Of Slaves.
Is this because nothing has been learned from past failure doctrine disasters? No, on the contrary, it's because the approach has been so spectacularly successful for the IMF's main donors and puppetmasters. What have been calamities for the people of the countries concerned have also been both the sparkplugs and the fuel for the engine of increasing political power the puppeteers have obtained through the IMF. And this time around they're set on doing themselves one better. This time they are aiming to buy up the Acropolis and the Coliseum.
And it's really simple from thereon in. It makes no difference whether you call it shock doctrine or 21st century imperialism or hostile takeovers, you can't take away from the people of Greece, Italy and Spain all the monuments of their past, as well as all powers they have over their own economies, production facilities and agriculture, and expect them to take that lying down. Not going to happen.
That's what makes the situation in Europe so dangerously volatile today. And it will all spread further too. We will end up with large parts of Europe being de facto owned by international conglomerates, who will use this ownership to drive up prices for essential services, food, electricity, water, housing etc. While at the same time IMF-style "reforms" will drive wages down.
The politico-banking class are all sitting there smugly and comfy in their bought-on-someone-else's-credit plush offices, picking through the still rich and splendid spoils of once proud nations and fiercely independent peoples. And even if they do win some of the preliminary battles at the negotiating table, the real ones can be won only through the use of violence.
There isn't much time left until that becomes a realistic threat, which means that now is the time for the people of Europe to decide whether they want to go down that road or not. And if they don't, they need to draw conclusions and accept the potential consequences of that decision: Get up, Stand up. And no, I don't have a lot of faith that they will. But I do hope that more people will now start to clue in on what that means: yes, violence.
Czech President Václav Klaus gives his view in the Telegraph this weekend. Klaus is not my favorite person, he's certainly no Václav Havel, but he provides a few good insights here.
The new push for a European Union federation, complete with its own head of state and army, is the "final phase" of the destruction of democracy and the nation state, the president of the Czech Republic has warned.
In an interview with The Sunday Telegraph, Václav Klaus warns that "two-faced" politicians, including the Conservatives, have opened the door to an EU superstate by giving up on democracy, in a flight from accountability and responsibility to their voters. "We need to think about how to restore our statehood and our sovereignty. That is impossible in a federation. The EU should move in an opposite direction," he said.
Last week, Germany, France and nine other of Europe's largest countries called for an end to national vetoes over defence policy as Guido Westerwelle, the German foreign minister, urged the creation of a directly elected EU president "who personally appoints the members of his European government".
Mr Westerwelle, in a reference to British opposition, called for nation states to be stripped of vetoes on defence to "prevent one single member state from being able to obstruct initiatives" which "could eventually involve a European army".
The new offensive followed the unprecedented declaration by the Commission's president, José Manuel Barroso, during his "state of union" address to the European Parliament on 12 September, that he would make proposals for a fully-fledged EU "federation" in 2014. "Let's not be afraid of the word," he said.
[..] Mr Klaus described Mr Barroso's call for a federation, quickly followed by the German-led intervention, as an important turning point.
"This is the first time he has acknowledged the real ambitions of today's protagonists of a further deepening of European integration. Until today, people, like Mr Barroso, held these ambitions in secret from the European public," he said. "I'm afraid that Barroso has the feeling that the time is right to announce such an absolutely wrong development. "They think they are finalising the concept of Europe, but in my understanding they are destroying it." [..]
"When it comes to the political elites at the top of the countries, it is true, I am isolated," he said. "Especially after our Communist experience, we know, very strongly and possibly more than people in Western Europe, that the process of democracy is more important than the outcome". [..]
In his book, Europe: The Shattering of Illusions, to be published by Bloomsbury on Thursday, Mr Klaus makes the case that the EU has evolved into its current form because political leaders have found it convenient to turn away from their nation states, where voters have historically been able to hold them to account.
"Political elites have always known that the shift in decision-making from the national to the supranational level weakens the traditional democratic mechanisms (that are inseparable from the existence of the nation state), and this increases their power in a radical way. That is why they wanted this shift so badly in the past, and that is why they want it today," he writes.
"The authors of the concept of European integration managed to short circuit the minds of the people, making a link between Hitler's aggressive nationalism (nationalism of a totally negative type) and the traditional nation state, calling into question the existence of nation states in general. Of the many fatal mistakes and lies that have always underpinned the evolution of the EU, this is one of the worst."
Mr. Klaus has kept his country out of the eurozone, a wise decision, since the Czech Republic was in no better position than Greece was when it joined the euro, and might well have ended up where Greece presently is.
The peaceful split between the Czech and Slovak parts of Czechoslovakia in 1994 will probably be talked about a lot in the coming years, if only because it went directly against he trend of unification. Had similar wisdom been used in Yugoslavia, we might have been spared a lot of violence. When there no longer is an economic reason for regions to stay together that have their own culture, history and language, then these regions will split up. That is not a disaster. Big is not better.
There were a million and a half people in the streets of Barcelona to celebrate Diada, the national holiday of Catalunya (I like their spelling so much better…) the other day. For the Catalans, independence is a done deal, it's just matter of time. They're on their way there, and they intend to continue on that way. Spain's refusal to let Catalunya control its own taxes, as well as a verdict by the Madrid Constitutional Court against a plan accepted by its own parliament to give regions more self-control sealed the deal.
The government in Madrid, however, calls the plan "illegal, unthinkable, lethal". The Spanish army is threatening to "crush the vultures". That sounds a lot more like Yugoslavia than like Czechoslovakia.
But it is the inevitable future of Europe. If and when Catalunya secedes, the Spanish Basque region will soon follow. The French Pays Basque will insist on joining it. Scotland? Wales, anyone? There will be many regions in many countries that will resist central governments increasingly feeding, like Rome did when its wealth was running out, on their peripheries.
People with distinct cultures, histories and languages will feel that they are better off governing themselves. And in many cases they will be right. They will realize that times will be economically much harder no matter what they do, so they might as well do it alone.
What Europe should be doing is recognizing these situations early, and facilitating cries for independence where these cries are loud and clear. It does no such thing. Europe's leaders want to intensify the union, not allow it to break up.
But Catalan polls show a majority of the people are for independence. And there is a UN charter that guarantees a people the right of self-determination. Still, the Spanish army vows to crush the vultures. Europe had better come to its senses fast.
The fate of the continent and its people is presently in the hands of a group of bankers, technocrats and delusional politicians. That fate needs to be clawed out of those white-knuckled fingers, and fast, or we will see a lot of blood in the streets.
Photo: Christophe Moustier 2006: Detail of bronze door of the Sagrada Família, Barcelona, Catalunya