BRICs to Rescue PIGs or just Sarkozy’s bid for re-election


The price of Merkel’s and Sarkozy’s ambitions?

The grand words of EuroZone leaders at their recent meeting to save the Euro are once again turning out to be words and not actions.


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The big idea from vertically challenged French President Sarkozy is to send a delegation, cap in hand, to beg money from China and the other BRICs (Brazil, Russia, India and China). That looks a lot like an admission that the Euro Zone has accepted that it is totally unable to sort out its own problems, but it may just be the opening round of the race for French President next year when Sarkozy looks set to be trounced.

The official reason for sending people out with begging bowls is that the BRICs have a lot to lose if the PIGs (Portugal, Ireland and Greece) default. However, Greece has already effectively defaulted with investors being forced to accept that they will not recover more than 50% of their investment and may yet see it drop below 10%. The wild card is that investor actions have already started to get the Greek default accepted as a default. The markets are still expecting to see the PIGs forced out of the Euro. That is credible because there is still no real flesh on Euro Zone proposals to address the crisis and civil unrest is growing as electors see themselves being squeezed to save the hides of profligate politicians who are mainly focused on maintaining the Brussels gravy train where they become rich and their electors become poor.

The risk to everyone is that the Euro Zone model is seriously flawed and, unless it is changed, the problems remain and only the symptoms will be briefly relieved. The basic problem is that the Euro is a currency waiting for a nation. It can only work if there is a single treasury and a single economic policy. When the German Customs Union created a single nation, there was one language and effectively a single culture and racial grouping with a common heritage. The Euro Zone is a mixture of languages, cultures, heritage and societies. If all 17 Euro Zone cultures agree to become German provinces with a single currency and economic policy, there is still no solution unless every country, forming the new super state, can control its own population. That has already been demonstrated as an impossible dream. At the two extremes, Germans object to their leaders signing over a large part of German income to subsidize the southern European states, and the Greeks object to being told by Germans that they have to sell their heritage at rock bottom prices to pay off their huge debts. The problem is now being made worse because Europeans are being reminded of German ambitions in recent history and the terrible wars they unleashed. It is a bad sign when a Reich Kanzler starts using the language of Hitler and other countries start portraying the German leader as a Nazi and the French leader as Petanist.

European countries working together as co-operating sovereign states, while celebrating their differing heritage, is a potentially powerful political and economic force. A Federal Europe attempting to submerge the rich and diverse cultures of European nations is a disaster waiting to happen.

In theory, full details of Euro Zone proposals are due to be presented at the G20 meeting but the other G20 representatives are maintaining that their meeting is all about preventing a full global recession and not about saving a few European politicians who are clinging to grandiose ideas.

What is now becoming clear is that a major change is taking place across Europe. The Franco-German plan for a two speed Europe, where they rob all the other member states and rule by edict, is not going down well even amongst their own electorates. Germans are becoming sick of demands on their tax Euros to prop up undisciplined southern European states. The French are sick of Sarkosi and feel that they are getting a rough deal. Across the rest of Europe voters are seeing the wheels coming off the Euro federal bandwagon and looking for alternatives. Britain is in danger of ceasing to be the most Euro-skeptic EU member.

These changes in public opinion across Europe are not welcome for Cameron and the British Coalition Government, hamstrung by LibDems who have been consistently frustrating steps to get a British economic recovery going. Having forced a large part of his own Party into opposition, Cameron is finding his electoral support evaporating. A referendum on EU membership is the last thing he wants but events are forcing him into a more robust position and threatening his status as “Son of the Traitor Heath”, although his conversion is only lukewarm and his track record is of constant U turns on policy. The danger for Cameron, and for the similar leaders of the other two old failed Parties, is that the Euro Rebels are growing in number. Some commentators are suggesting that the 81 Tory rebels could see their numbers increased to 130, Labour rebels to rise to 60, and Libdem rebels increase to 6. those assessments are begining to change daily and always upwards. If they are correct, there is a growing movement that can be expected to grow beyond those numbers. For the leaders of the three old failed Parties the greater danger is that once an MP rebels against his or her Party on one policy, the habit of rebellion will grow and apply to other policy issues. Very soon, it becomes impossible to govern. The other danger for the old failed Parties is that they are looking more and more out of tne with electors, less in touch with economic realities and seriously out of touch with the dangers of the EU and the Euro Zone.

The UK Independence Party has for some time been working on the building of a coalition with other Euro-skeptic Parties across Euro and may yet see some significant defections from the old Parties to its colours. As the Euro-skeptic voice strengths in the European Parliament, all governments come under increasing pressure, even in Germany and France.

The big question now is whether the Euro-skeptic movement in Europe will speed the failure of the Euro or benefit from progressive expulsions of Euro Zone members.

Apart from a temporary relief in the first two days after new Euro Zone claims of a plan to save the Euro, fears have been steadily increasing and expanding. Originally even the Greek problems were denied as the country headed for insolvency. Then the contagen spread to Ireland and Portugal. The so called PIGs have never seen a solution to their problems and only Ireland shows determination to try to rebuild its economy, largely with generous loans from Britain. Since then, the markets have come to appreciate that Spain and Italy are in desperate straights. That then takes the size of the problem beyond the capabilities even of Germany in the Euro Zone, and the admission of the problem by the sending of beggars out to the BRIC countries.

Europe now faces two problems. Firstly, the BRICs may not have confidence that any loans they pay over will ever be repaid and China has already lost a great deal of money in attempting to prop up the US. Secondly, any loans may come at a very heavy price. India has already demonstrated a desire to force open European markets. Russia is showing a desire to rebuild the old USSR and has a shocking record on civil liberty that is getting worse. China not only has a terrible civil liberty record and a demonstrable desire to build its military power, but is very tender about any criticism at a time when there is a growing movement within China that demands improvements in civil liberty. Even the Eurocrats sent out with begging bowls are admitting that the price of economic aid from the BRICs may come at an unacceptable price.

The situation is chillingly following the development of the Great Depression, but on a greater scale. Countries are still putting what they see as national interest or ideological interest ahead of a desire to stabilize the global economy and effect a return to growth.

Reich Kanzler Merkel may have threatened war as a desperate attempt to find some way of convincing others that the Euro has to survive at all costs, where the ultimate consequence could well be war, but not a European war. The threat of a global conflict with nuclear weapons is greater now than at any time since the USSR developed its own nuclear weapons and the means to deploy them. The last two decades have seen an increasing fragility as terrorist threats and national interests have been a feature of the transition from Cold War between the US and the USSR. In a period of economic crisis, a few ill-chosen words or the exercise of new-felt power can precipitate a major war in much the same way that the 1914-1918 War was created by a series of relatively minor mistakes and a helping of national pride and ambition.


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