HOW THE CURRENT CRISIS IN EUROPE WILL BE RESOLVED
Europe is rapidly approaching its D-Day – unless there are major changes of the economic and political structures that currently exist in the Eurozone the dream of a united Europe will unravel, and once again the European States breaking up into separate entities scrabbling amongst themselves.
The financial problems of Greece, Italy, Spain, Italy, Portugal, Belgium and Ireland are a result of a flawed economic model, trying to solve their short-term financial problems with borrowed money. It was a mistake to believe that nations could have independent fiscal policies if they belong to a single currency. As they no longer have the ability to create credit to finance their deficits, they must adjust to live within their incomes, or borrow money. When they no longer do either they are in trouble. What we have in the Eurozone now is not a sustainable economic model, which only will survive if changes are made quickly. Lending money to debt-ridden countries such as Greece is not going to solve this problem.
The only long-term solution for resolving the current crisis is having the members of the Eurozone follow fiscal policies which are controlled by a single Federal Government, similar to the USA. This EU Federal Government which would take over the national debts of the member states of the Eurozone, who would in turn give up many of the sovereign rights that they currently enjoy. Defence, foreign affairs, national security, and finance will take over the responsibility of administration by the Federated Government. This new Federated Government would have the authority to collect taxes directly, issue bonds and allocate resources as necessary.
Those nations that will not accept the terms required to become a part of the Federated United Europe will be forced out of the Eurozone. They would remain in the EU but no longer have the financial support of the Federal Government, creating a two-tier EU. They would not be a part of the new EU Federal Government unless they submitted to the authority of the Government. It is expected that some of the countries in the Eurozone will not join the new Federal Government as they will fail to gain the domestic political support to make the constitutional changes.
Creating a single political Federal Government will strengthen the Euro, having it replace the weakening US dollar as the world's reserve currency. It will create the largest single economic power in the world.
What Europe is lacking at present is a leader – it is facing a crisis in leadership. Europeans look at the United States and see how having a single President who can project the authority and power of the USA is lacking in Europe at present. While the EU has 2 Presidents (which in itself leads to confusion), it is the heads of individual member states of the EU who make the decisions and public announcements, not the figurehead EU Presidents. The new European Federal Government will have a single President who will have the authority to speak on behalf of the Federal Government and make major decisions – similar to the USA today.
Germany as the most dominant economic power in Europe is in a position to force upon the rest of the member Eurozone countries the terms and conditions required for them to be a part in this new political union. While in Germany there is considerable political opposition to bailing out the insolvent members of the Eurozone, this political opposition would be muted if those nations requiring a bail-out would agree to come under the authority of a single German-backed Federal Government.
The recent failure of NATO in bringing to a swift end to the rule of Gaddafi in Libya has shown how weak and ineffective the EU is having an effective defence force. Not having a single united defence policy supported by a Federal budget has been an embarrassment shown up by their inability to over-throw a third-rate leader such as Gaddafi. If it was not for the US military support of NATO they would have already failed in this fiasco. The new Federal Government would have the revenue to be able to finance a single military to be used in future conflicts.
Having a political union would create a period of economic growth and prosperity for the Eurozone nations. The issuing of credit by the European Central Bank in the form of EU Bonds to replace national debt will relieve the debt burden of member states and herald a period of prosperity. The bonds would partly be financed from taxation collected by the Federal Government and partly by increasing the money supply. By controlling revenue they will be able to impose political decisions and fiscal discipline on member governments who have been unable to do so because of domestic political factors.
Failure to put in place a single Federal European Government to save the Euro will result in a series of defaults by EU members, setting off a global depression. National governments must give their authority to this new Federal Government for their economic survival. They have little choice but to agree. All that is needed is a leader who can gain the trust of the people and provide the leadership for Europe to prevent this crisis unfolding. The European leaders have little choice but to act quickly now and implement the political changes, transferring their national sovereignty to this new Federal Government. Unless they act now, the world faces a global depression.
This new Federal Europe will have the authority backed by its economic muscle to impose conditions on the global economy regulating trade and imposing environmental protection standards to stimulate sustainable growth. The faltering US economy, the shaky banking system of the Chinese and debt-ridden Japanese Government will result in Asian manufacturers increasing looking to Europe instead of North America as being the market to purchase their goods. Europe will again be the centre of world culture and economic prosperity.
Over the coming weeks we will see the emergence of this new global super-power, replacing the declining Anglo-American alliance which has dominated the political and economic landscape of the world for the last 200 years. The speed of the creation and power of this new European Federal Government will surprise many changing the political landscape of the world. What we are seeing unfold now is of truly significant historic event.
Bruce Porteous
25 June, 2011
bruceport@xtra.co.nz
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