It is always nice to see that the NOS news will not stop to give me the inspiration I need on a gruelling Monday morning. We have all heard on the image of the Euro, the need for bail outs left, right and centre and the impression that the events do not seem to worry too many people. Yet, perhaps this look on the matter at hand from the financial industry and their ‘beneficiaries’ are overly too not worried. What most seemed to have forgotten is that any government (especially in Western Europe) is dependent on voters and the way they think, or more precisely the way they fear!
With a possible new political party, leaning slightly to the right (or better stated slightly conservative) a new option will have arrived with one specific agenda. The intention to move Germany away from the Euro currency. In itself it is perhaps not the immediate worry. Consider that Western Europe was on a route to real or feigned restoration, which does require Germany to weather the storm as it was (I am not ignoring the work France did on this either). It was the immense amount of self-austerity that Germany performed on itself that made them the strongest economy at present.
The issue is the new party! Even if this new party gets a firm foothold, it does not mean that Chancellor Merkel is in danger as yet. The predictions are that this new party stands to get up to 24% of the votes (presently at maximum). So the Chancellor is still in a comfortable pace for now. There is however the issue that not much more is allowed to go wrong at present as this could change the game as is with Chancellor Merkel to become the loser in the next election.
Why is this so important?
Anyone who tries to trivialise this is clearly of their rocker (and out of their mind too). This event, should it take place is huge and the impact it will have is pretty much beyond what anyone can imagine.
Consider two scenarios.
In the first scenario we look at the one that had been an issue a few times in the past. This was the situation where those countries unable to pull their weight would be cast out of the Euro. Merkel united with the others to prevent this in the past. Greece was number one on that list, but at present Spain might actually end up getting added to that list, so there is a lot at stake and the new party might change all that.
The second one is the one that is most concerning to all non-Germans. If the new party gets the strong voice, and this chance is not that far-fetched at present, then there is a chance that they will move to remove Germany from the Euro and moves straight back into the Deutschmark.
There will be many voices on how this will never happen, and then carefully phrased denials on how the Euro is in serious danger. Make no mistake; they will be leading you on. The bulk of all Euro countries are in deficit. Most have NO concrete plan on recovery (they all claim it will happen, yet the events are against them). They all claim that they have which they obfuscate by overenthusiastic information on economic recovery NEXT year. Too many parties are in assumption mode and too few in a state of pragmatist optimism. I do not pretend to be the expert. I am not some PhD with the knowledge of economic events. I am a data miner. I have looked at data in many forms for most of my life. From this point I looked at data and no matter how complex some parties make it all out to be, some simple rules always apply.
First event to take into consideration is that America seems to be printing more and more money on a daily basis. Printed money, which does not seem to be set against anything tangible especially, taking into account a massive 17 trillion dollar debt. Funny enough Germany did something similar in the 1920’s. I remember it because I used to have one of those fünfhundert tausend Deutsch Mark bills (DM 500,000) which is now valued at less than $5. So is this where America is headed? No! I doubt that it will get THAT bad, yet a bankrupt America would be the definite death nail in the coffin now known as ‘the Euro’.
A second fact in this equation is the economical drop in several nations. The Netherlands, Italy, France are all in a not so good financial position. A nice little footnote to this is that the Dutch TV (NOS) reported that the Netherlands would see a more then 2% increase in their economy for 2014 on March 3rd 2013. Yet on the Dutch government site (http://www.cpb.nl/persbericht/3213019/zwakke-groei-economie-door-achterblijven-consumptie) on 13th of March (10 days after my blog doubted that in my article ‘march Hare of Government’) it now states the increase to be only 1%. I still think it is slightly too high, but whatever, I had made my point. France is also toning down their near future predicaments for their economy. For now only Germany seems to have some reasonable strength (in the short foreseeable term). This is relative as it cannot pull the weight of Italy, France and the Netherlands. Should Germany pull out then the Euro will have a definite problem on several levels.
Before you consider calling Germany names consider that the Euro can only survive if ALL pull their weight. Most of the nation’s overspending the way have been doing for some time is not that. As stated in earlier blogs. When you overspend for well over a decade, at some point the invoice is due and too many are ignoring that little fact. So don’t blame Germany, blame your respective governments. If you have any doubts on that, look at how Cyprus needed 10 billion, an island with barely a million people living there. That is only one island. Several nations are in much higher debts. Granted is that they are not reliant on 80% of their GDP coming from the banks and financial industries.
So the Euro and the issues they might be getting.
It would be very incorrect to say that it is all about the value of the German Mark, yet this is not that incorrect. If you have a soccer team and you lose your star player, will that team survive? Yes, it usually does! However, in most cases that team will not end up as high because of the loss of their star player. When that team is pulled by 1-2 players a lesser result is usually the case. The issue becomes will that team continue on the same level (division) as the other teams. My thought is that this is not the case. That new German party does have a valid point. The other nations could survive if those weaker players are no longer there. What will happen in the immediate response is one from the markets and it will not be a positive one.
We are now left with two thoughts.
1. Should this direction be avoided?
I do not have a direct answer. Let us face it. The chance of Greece or Cyprus EVER paying back their debts is pretty much out of the question. There are off course the additional nations Spain and Ireland. What about them? So far they are coping, but consider that the economy will remain weak until at least the end of 2014. There is no true answer of what to do in that case. Throw out more and more nations? Will the Euro become a factor analyses under the leave-one-out approach? This seems a cold and very logical approach to deal with this matter. Have we loathed ourselves to such an affect that nations are now under the scrutiny of a spread sheet approach?
2. If we embrace this path what is the use of the Euro?
I personally still see the Euro as the means for America to do away with all these different currencies and have a nice go at corporate Europe by moving in with all their options and less as a solution to unite Europe. This is a personal feeling in this matter and the evidence seen in the last three years are clear that European unity is a nice theory and that is all it remained. A theory! If there was true unity then budgets would be kept in check on a European scale. Yet the Euro nations seem to remain a place of PowerPoint global and expedite ‘the local needs’ as it ever was. No matter what we read in the papers and propagated by all kinds of interested parties. The issues in play are kept in a vicious circle.
I wonder whether this is what the banks envisioned from the very beginning, a debt driven society that leaves them out of the equation to do whatever they wanted. This is how we get back to this new German party. Their most prominent speaker was Bernd Lucke, a professor of Macroeconomics from the University of Hamburg. Is he wrong? He definitely knows more about economy than I ever will, but so are the experts who are on the other side of that equation. So where should we stand? It was Bernd Lucke who mentioned in a German magazine ‘Spiegel’ (German for Mirror) in 2011 that all these collapses would end up in the German lap for an amount of 180 billion Euro. That is almost 2200 Euro for each German citizen. And it seems that so far his vision is slowly becoming reality. If someone has to pay 2200 for damages they never made, or issues they never ordered. Would you not get upset with that?
Governments do not seem to accept accountability, Banks and financial institutions are given free reigns to do for the most, whatever they like and the population end up having to pay for it all. How long until we have had enough? This is where the German population is at now. So when people start talking in a trivialising way consider your personal financial situation. Consider paying 2200 Euro for something that is not your fault, not your order and add to this that there is no guarantee that it will not happen again next year. Now consider that the amount is on average 15% of a Germans pre taxation annual income. With German economy losing strength not unlike other European countries, ask yourself how many Germans will consider an alternative to the vision of Merkel?
My views?
Europe should stick together, but there is a clear valid worry that leaving the bill to be paid by a few without clear regulations on what some are allowed to do is just not realistic. It is the present German fear and it is shared by too many people in Germany.
Lawrence van Rijn - Law Lord to be 