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The Euro is Becoming a Debt “Straight-jacket”
September 1, 2011
In the not so distant past, dozens of nations were queuing up to join the European Union and the prospect of unlimited economic growth and opportunity. Today, that prospect has been left wanting by a succession of economic failures and predatory institutional lending in the Eurozone.
Speaking at an economic summit in Austria this week, Czech Republic President, Vaclav Klaus, has likened being in the Euro to being caught in a “debt straight-jacket”. Suddenly, being a part of the Eurozone is looking more like a liability than an asset.
Thus far in 2011, the economies and respective credit ratings of Greece, Spain and Ireland have all fallen by the wayside, and even EU stalwart France may lose its AAA credit status.
Indeed, many financial experts warned that this present situation was inevitable, as the same mega-banks who were the architects of the current European monetary structure are also the very same banks who have presided over this disastrous ‘boom and bust’ cycle by leveraging their paper capital by as much as 40 times their actual cash.
It’s hardly a level playing field. On the banking side, there are simply no capital rules to adhere to. Unlimited leveraging used to pump countries like Greece full of paper and junk bonds, with almost no risk. On the host country side, there are very strict rules- EU membership based on the original Maastricht Treaty actually requires a 60% debt-to-capital requirement. Austerity measures are naturally applauded by neoliberal economists, but the reality is that under the yoke of institutional debt, these countries may never be able to truly balance their budgets.
Any bailouts to the likes of Greece will simply end up back in the hands of other lenders. Despite the risk posed to the entire system, the banks still retain little risk in this game and it will come as no surprise when few EU bureaucrats balk at the prospect of yet another banker bailout.
Rather than expunge the debt and have investors realise their capital losses, the banking cartel will simply pile on more debt, leaving Europe’s flagging economies with the ‘no alternative’ solution of implementing severe austerity measures designed to service the interest on their ever-increasing mountain of paper debt to the likes of the International Monetary Fund (IMF).
Any bailout money applied to a country like Greece will simply be sucked out via predatory lenders as fast as it’s poured in, similar to the original “IMF-African model”. Over the years, banking cartels have routinely managed to crash most Third World economies in places like Africa, South America and elsewhere, softening their targets in order for the IMF to come in and deliver the ultimate knockout punch in the form of massive loans at loan sharking compound interest rates which were mathematically impossible to ever pay back. In return for the loans, the host countries would always be forced to implement the most draconian of ‘austerity’ plans, which were called restructuring. Now that the banking cartels and the IMF have finished feeding on the Third World, they have simply shifted their very same tag-team act to the developed world, namely Europe.
Next in the economic firing line will be Italy, Cyprus, Luxembourg and Hungary, leaving EU leaders Germany, France, and Spain to shoulder the blows. Relatively healthy growth countries like Poland and Czech Republic will now- understandably- be thinking twice about jumping into the Euro. Banking cartels will also be looking at those same countries the way a pack of wolves look at two sheep grazing on the range- another meal.
The Czech Prime Minister’s comments certainly speak for a number of other nations once eagerly queuing to join the prestigious club of Brussels. The reality is that a single currency no longer looks as sexy as it once did.
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