Thursday, April 29, 2010

Not To Worry...

The model of the US federal system which brings the states into a common interest union has had appeal in Europe since the end of World War II. In the 1950s the French, Belgian and German heartland formed a rudimentary system with a coal and steel union. That morphed into a broader "Common Market" which sought to reduce trade barriers between nations for the good of all. The military alliance forged by Harry Truman under the North Atlantic pact, NATO created another venue for consolidated efforts in solving a common problem. Problems didn't end at national borders and solutions were needed to be accepted in common.

When I lived in Germany I was barely twenty miles from the French border at Saarbrucken. On a Saturday morning we would often hop in the car and cross the border to the French market for breads, cheeses, fresh vegetables and, of course, wines. But, that border had varied often over the years. It wasn't always at the Saar.

Enroute to work from my little village, traveling in the opposite direction from France along the B40, I would pass a small gasthouse called Zum Alten Zoll. That was the "old customs house" or border marker. Once my village of Sandorf-Homburg had been in France.

During my time in Europe I saw borders open. Where once a passport check had slowed your travel between countries, the checkpoints were disappearing and it wasn't much different than passing a roadsign saying "Welcome to Colorful Colorado."

A European Union emerged with a pseudo legislature headquartered in Brussels. There delegates from the member nations would gather for jaw-boning but little binding action. Still it was a framework for federalism emerging.

Then came a huge step; the creation of the Euro. A common currency for member nations meant you no longer would worry about exchange rates and wallets full of different tender with different values that were always shifting. Initially established at one Euro equivalent to one US dollar, the Euro was both a giant step and a significant sacrifice of national sovereignty for the participants.

When a nation controls their own currency, they can control their own debts, inflation, interest rates, buying power, international status, etc. When they are inexorably linked to other nations with different national priorities, they increase their jeopardy.

The experiment was looking incredibly successful. The Euro looked like a wise decision. Britain was being continually pressured to abandon the pound sterling and join the group. Other nations lined up to join the consortium. The value of the Euro relative to the dollar rose significantly and all was rosy.

But, under it all, there was the problem of Euro-socialism. Without the constraint of eroding your own nation's currency value, it became much easier for demands for social spending to overwhelm the budgetary restraints that might otherwise exist. Weaker economies were effectively artificially propped up by the more robust economies. Debt would be easy because the common currency would be sound.

Now, things appear to be fracturing. Greece has been in financial trouble for months. This week the value of Greek financial instruments on the global market has been reduced to "junk" status. Portugal is in the same position. Both nations are essentially bankrupt.

Spain, which has an economy four times the size of Greece's, is apparently on the tipping point. Franco would not be pleased at how democracy has worked out for his nation. It will probably join the collapse sooner rather than later. Germany looks poised to jump to the aid of Greece with a bailout, but they would be unable to prop the Iberian states as well.

But, have no fears:

Messiah Concerned Over Debt--Greece's Debt, That Is

That's right, boys and girls, Mr. Fiscal Responsibility is expressing concern over mounting debt. Well, if there is one thing he knows about, it's debt!

1 comment:

nzgarry said...

US constitution:
Original length 12 pages, Ratified 1790, famously begins; "We the people...". 220 years old and still going strong.

EU constitution:
Over 500 pages, Unratified. About 6 years old. Begins "His Majesty the King of the Belgians...".(??!!)

Can it work, can it last?.

As for National debt, the whole world seems to have it except for the communists. Can this last?.