The 'United States Of Europe' Beckons
(Forbes) -- by Clem Chambers --
It has long been said that the euro was just a step towards a federal Europe. When the European currency went into crisis, as it would be assured to do so, it would force closer fiscal integration--effectively meaning closer political union.
Closer union appears to be coming true. The euro, in its old form, has fallen into crisis and the price European countries have to pay is a large loss of sovereignty. Nationalists would consider this disastrous. In reality, there are not so many nationalists in Europe these days and many countries, and their populations, consider themselves European and see little problem with further integration.
What is set to happen is that the European super state will hold the cheque book of euro member countries; or at least be able to snap it shut should any one country wish to run away with its local budget.
Money is power and once ultimate budget power is gone, political power will subsequently be drawn into the federal centre. This illuminates the character of the current crisis; it is purely political. Come what may, economic ramifications of the crisis are secondary to those of the political necessities.
Central banks and their job, of fixing interest rates, is the primary bastion of central state control over free markets. Consequently, it is not surprising that this is where the economic trouble has come to a head.
A decade of low interest rates has allowed states in the developed world to build up titanic debts. Europe, with its socialized model, has bloated to such a degree that the world demands higher interest rates to support its debt levels than most of Europe can afford to pay.
Due to these countries sharing a single currency they cannot adjust their currency through relation to cope. They cannot “print” and the ECB is bound by charter and German ire from doing so on their behalf.
They therefore need a hand-out from the better off members of the currency union, in this case Germany.
Germany will only accede to this if it, or a proxy, has control over the purse strings to make sure the wastrel of Europe won’t spend Germany into ruin as well.
The U.K. doesn’t like this one bit as it sees many problems. The U.K. doesn’t like the idea of a United States of Germany and sees that, in a federal Europe, Germany will rule. There is no real reason to loath this idea, except geopolitical pettiness, which of course politics abounds in.
The other reason is the U.K. feels Europe is gunning for the British financial sector, which accounts for 20-25% of the U.K. economy.
This is ironic, as U.K. politicians and media have been pillorying the financial sector for years. However, now like an abusive spouse, the British government is frightened of losing its rich wife. That aside, the perception is that Europe wants to strip that financial industry from London and ship it to Frankfurt and Paris; a unified euro based Europe would present a platform to do just that, leaving Britain a poor toothless semi-autonomous region...MORE...LINK