Charles Hugh Smith
Today Chancellor Angela Merkel addressed the German parliament about last week´s EU "summit", which was supposed to - once again - "save" the euro. As we pointed out in an earlier post, Frau Merkel´s speech included a great number of meaningless words that will not convince markets and investors.
The novelist and economic commentator Charles Hugh Smith gives a much more honest description of what Europe´s leaders in reality have been doing:
"Fiscal union" is the code-phrase for the EU nation agreeing to automatic sanctions (penalties) should their borrowing exceed what is deemed prudent. In this sense, it's little different from the 3% deficit limit that the member states agreed to via the initial treaty but conveniently ignored.
The "teeth" of automatic sanctions is supposed to force nations to "tighten up" their fiscal and tax policies (including collection)--"austerity" at the fundamental economic and governmental levels.
In other words, "Oops, we borrowed too much, default looms, let's paper over the insolvency by really really really promising to borrow less from now on."
The mechanisms of the overborrowing--overleveraged, politically dominant banks and the euro--are left untouched. Why? For the "obvious" reasons the mechanisms of EU governance has been captured by the banks and their apparatchiks, and as a result of the quasi-religious devotion of the Eurocrats to the single currency, a catastrophically wrong-headed fantasy that they cannot give up without losing face.
In a functioning democracy, then those who reaped the gain (the banks) would actually be exposed to the risk that accompanied their gain. But sadly, the EU is not a democracy except as a simulacrum propped up for PR purposes. The risk and the gain have been neatly separated by the Eurocrats and the toady figurehead leadership (Merkozy et al.).
As a result the gain remains safely private with the banks while the risk and losses are shifted to the taxpayers and citizens of the EU, who must now make good on those stupendous losses while remaining exposed to the risk of future default.
The same is of course also true in the U.S., another facsimile democracy in which the government and its proxies guarantee banks' profits and leverage while transferring the risk and losses to the voiceless taxpayers. (Go try to cast a vote over Fed policy. Serf, meet your Overlord, Ben Bernanke).
The banks and their lackeys in government prefer to use unaccountable proxy agencies to do the heavy lifting--the European Central Bank (ECB), the Federal Reserve, and the European Financial Stability Facility (EFSF), which is soon to be joined with other alphabet-soup agencies of oppression and predation, all in the name of "rescue."
Rescuing who and what? The banks and bondholders, of course. This requires avoiding not just democracy but also capitalism, which would require the clearing of bad debt via the discovery of price of both debt and risk, and also socialism, which would require wiping out the wealth of the banks and bondholders via nationalization, a process that would at least return surviving assets and control to an elected government.
It's not democracy, capitalism or socialism--it's all opacity and artifice to mask the imposition of a new, improved debt-serfdom on Europe, all in the name of "fiscal unity."
The eurocrats and the toady leadership would be more honest were they to simply declare: "We had to destroy democracy to save the banks. You are now serfs in our financial fiefdoms."
Smith´s phrase about the"quasi-religious devotion of the Eurocrats to the single currency, a catastrophically wrong-headed fantasy that they cannot give up without losing face" is particularly to the point. Merkel, Sarkozy and the others may be able to postpone the day of reckoning, but in the end they will not be able to avoid a loss of face. However, the longer it takes, the more expensive it will be for the European taxpayers.