If the euro falls, Europe falls

Third part of FT series here.

16 replies on “If the euro falls, Europe falls”

Jorg Asmussen: “Either you do what is right for Europe and they crucify you in Germany or you are the hero of the FAZ and you ruin Europe.”

And there you have it, straight (or nearly) from the horse’s mouth.


I wonder a little bit, whether it is optimal for discussion to have a separate thread for each of Peter Spiegel’s series “How the Euro was saved”.

I would prefer to have the discussion in one thread, maybe the first one?.


you would have a reliable link / reference for your Jörg quote?

I was under the impression that Europe was already in free-fall in geo-political terms!

In macroeconomic terms, Europe (other than Germany which is cannibalizing the rest of the EU in its short term interest) is already falling behind the other major economic blocks in terms of growth.

As for real democracy … ’tis a lovely afternoon so no point in upsetting meself.


AN ABSOLUTE MUST READ ON UKRAINE – Political Economy & GeoPolitics

Michael Hudson: The New Cold War’s Ukraine Gambit
Posted on May 16, 2014 by Yves Smith nakedcapitalism.com

[Hudson concludes, in a brilliant (and IMHO accurate) exposition:]

The past century has seen a counter-revolution against the Enlightenment, classical economics and its culmination in socialist hopes to steer industrial capitalism to evolve into democratic socialism. What is occurring today is a self-destructive financial dynamic of impoverishment, dependency and breakdown in many ways like what happened when Rome’s creditor oligarchy plunged the Empire into the Dark Age two thousand years ago. The post-feudal real estate and financial oligarchies, the landed aristocracies of Europe and the great banking families and American trust builders have made a comeback, and the New Cold War is intended to lock in their victory. Ukraine is simply the latest battlefield, and battlefields end up devastated.


Michael Hudson is Distinguished Research Professor of Economics at UMKC, and former Professor of Economics and Director of Economic Research at the Latvia Graduate School of Law. His most recent articles on the post-Soviet economies are “Stockholm Syndrome in the Baltics: Latvia’s neoliberal war against labor and industry,” in Jeffrey Sommers and Charles Woolfson, eds., The Contradictions of Austerity: The Socio-Economic Costs of the Neoliberal Baltic Model (Routledge 2014), pp. 44-63, and “How Neoliberal Tax and Financial Policy Impoverishes Russia – Needlessly,” Mir Peremen (The World of Transformations), 2012 (3):49-64 (in Russian). МИР ПЕРЕМЕН 3/2012 (ISSN 2073-3038)
Неолиберальная налоговая и финансовая политика приводит к обнищанию России, 49-64.

Update: after her trip from Kharkov to Odessa [viewing the sights of the Battle of Kursk and paying her respects in Odessa) Blind Biddy is taking a short break in Glasgow (‘Lady in Red’ tonight) and Edinburgh, with the One-Eyed Shia Sheik, over the weekend.

It is difficult to comprehend that something so fragile as the Eurozone can be held together by something so intangible as Draghi’s coup de grace “..whatever it takes”. Either there is something fundamentally stronger holding it all together or we are merely in the Draghi holding pattern before those words are properly tested and the fall out of that test is likely to bring on another crisis which could take many forums – political upheaval in Germany, bond yields skyrocketing again, inflation etc…who knows. My view is its the latter and while there is gold in dem there hills someone is going to go after it.

@ Kerchav

It is not so much that Draghi said it but that he must have known that he had Merkel’s implicit endorsement – and that of Germany as anchor of the euro – when he did so, all the died-in-the-wool opponents in Germany having been skillfully outflanked by her with his assistance.

This is the fundamental political point, it seems to me, being missed by de Grauw and Ji (see link to paper posted by KOR). The markets certainly have not done so.

The debate has moved from the question of whether or not the euro will continue to exist to that of how to revive the necessary levels of economic growth. This is no longer solely a debate between the core and the periphery as the most recent EU data reveals.


It may be noted that the wheels came off the US economy in Q1 2014 and the performance of the Netherlands and Finland is now dismal. Accepting that all in the EU are in some degree of difficulty is a better basis for finding an eventual consensus on how to proceed than the narrative hitherto of saints and sinners.

As to the UK, who knows? For the moment, the spurt in economic activity there – whether soundly based or not – is good news, especially for Ireland.

The Euro is more likely to fray at the edges than to collapse. It is highly unlikely that a EU collapse will be an automatic outcome of a EZ collapse. Europe can function with a group of countries disciplined enough to meet EZ standards, with the EZ and non EZ members coexisting however unhappily within the EU.

Full disclosure here, I am from Kerry and we are firmly convinced that Great Britain and its business press take every available opportunity to undermine the EZ and EU. I cannot put a name on the GB anti EZ and EU syndrome, perhaps O’Donnell could take a shot.

It will take a lot of courage for the guinea pig who departs first. It is likely to be caused by widespread internal dissension approaching civil war with departure being viewed as the least painful of a number of unpalatable options by the government. If the first country out the door does not finish up in ICU under the care of IMF and UN peacekeepers then others in a similar state of disarray will follow.

Europe can survive without the EZ but it will not be as prosperous as it will be if the larger and medium sized countries remain within the EZ. It is of little consequence to the EZ as a whole if it sheds countries with a population of less than 40 million who are experiencing difficulty managing responsibly. Inside the EZ or outside the EZ they will continue to flounder. It matters very much to individual countries like Ireland that they continue to reap the benefits of a frictionless currency in which to trade and travel within the EU.
Which country that matters will be the first out the EZ door. I believe that Italy has been close to ungovernable since WW2 and that its government will soon come to the realisation that a return to a dolce Lira is necessary to have la Dolce Vita. Prussian discipline is an acquired taste not often found south of the Alps. I am assuming here that Switzerland is in the Alps not south of them.
We Irish are a hard bitten bunch, no strangers to hardship and with a pronounced tendency to tough it out. After all, as they say in Kerry “To hell with poverty, we will kill a duck.”.

Collapse of the EU is unthinkable and if it looked likely we would quickly resort to the Rosary Beads and Holy Water. I was watching Fellini’s 8 1/2 a few days ago where a doctor prescribed Holy Water be drunk three times a day. We have a lot in common with Italians.

@Mickey Hickey

Methinks it is known as ’empiritisdeficit’ – a chronic, if not life threatening, condition.

Let’s see what a TCD graduate [is it still OK to say TCD?_not in breach of any rebranded trademarks?] make of it ….

… doubt, the 40th anniversary that is in it, that we will see the files of military intelligence from Lisburn at that time …


Incredible concerns listed here. I will be prepared to peer your post. Thanks that i’m taking a look in advance get in touch with people. Can you you need to drop me a mail?

Hi I read this blog everyday, it’s very interesting and informant but I can’t get over the fact that all you guys do is write about what needs to be done but have no way of being involved in what is needed. Most of you are paid by the public purse and wouldn’t know poverty or need if it jumped up and bit ye, yet you sneer and scorn at the welfare class as you so eloquently class them. I hope none of you are ever in need of dole payments or are forced to work a Jobsbridge programme. It is soul destroying. But carry on in your secure jobs and keep patronising the little people.Rise up shur his have nothing to lose cept your dole


erm, I posted a reply to you last night, after watching the german football finals, in the other thread:



I see the election of Renzi in Italy actually as the result of realizing, that trying to push their government debt onto the rest of Europe will just not happen. AFAIK 75 % of their 2 billion debt (about 130% GDP) is held by Italians.

If they would do something stupid they would mostly hurt themselves. My gut feeling is, that them leaving the Euro would put them as a best case go through some short term hell, a permanently lowered GDP of at least 10%, but they would then be again Captain of their own ship.

Would that be preferable to pay a present 3% rate (minus 2% Inflation) on their debt, or would it be not easier to have a little property tax on their rich, for like 10 years?

The English hypocrisy is a second point I agree with David O’Donnell. At 3 I would start to worry, if we become a sedated consensus fest here : – )

Especially looking at the little critter, DOCM cited


who wants to have a say on German constitution doctrine and habits.

As O’Donnell said and Frau Doktor Merkel confirmed a few days ago “Germany’s whole system of government, labour law, company law and the revered Constitution was imposed on Germany by the victors.”. Clever as she is, she shoved this up Obama’s nose in response to his demanding action on the recalcitrant Bundesbank foot dragging.

Italians are a proud people with a surprisingly resilient economy. My son tells me that engineering staff he deals with in Italy are knowledgeable and models of flexibility and cooperativeness compared to their French, British and German counterparts. The French he finds are rules and hierarchy bound more than the others. If your Gov’t is ineffective it seems one has to try harder to compensate. I too have found Italians easy to reason with. Whisky was invented to stop the Irish from dominating the world, Italians have bad gov’t for the same reason.

The Independent is now owned by a Russian oligarch Alexander Lebedev with the editor Amoy Rajan born in Calcutta. The British have little control over this particular newspaper.
An article like this would have been unthinkable even 25 years ago.
I had a grand uncle who was conscripted at the point of a gun in 1917 and shipped to the NorthWest Frontier, Khyber Pass. Spent twenty five years there and retired to Tipperary with a British Military pension. At that time the conscripts from Kerry could not be trusted in the European Theatre of war.


Where do you have this quote from ?

As far as I have seen, Merkel did not confirm anything, and was quoted only indirectly in the 1st Spiegel piece. And that surely is niece spin piece of propaganda. He does not even mention the ESM and the Stability pact, tow cornerstones. Of course they conveniently forget the “Within our mandate …” before the “… whatever it takes”. Just the typical Anglo Spinmeister : – ).

It is a wild exaggeration, much of our labor law was written later, and how far we interpret the power of the constitutional court is subject to us, now.
Beyond that we would have had plenty of time to change it in the last 20 years.

But to shove it up the alien American arrogant aggressor nose of Obama was just for perfect for this moment : – )

Afterall the criminal Obama had just demanded to topple the German constitution.

With respect to your Italian engineer, during my time at IBM we were engineers from all over the world, Pakistani, Indian, Mainland China and Taiwan, Japanese, Russian, Greek, Italians, Germans, Jews and Gentiles, and we all worked together, and I didn’t see much difference. I might have had a little more math at university, the Japanese haggled more things out in their smoking corner.

One of my bosses said, if I want something from Americans, I call a meeting, the Germans I get at their coffee machine, and the Japanese in the smoking corner.

The problem are the political systems.

And with the Obama administration is has become very clear, that it was not just the crazy GOP under Bush, II., but that the imperialist mindset is deeply engrained in the Democratic Party as well. They believe they are the new Rome and can push everybody else around. Spying, starting bloody wars of aggression. This is now the fourth attempt to pick fights with Russia.

For us, peace in Europe was obtained by systematic de-escalation politics, OSCE, and taking the legitimate interests of the Russians into account. And that will stay that way.

I doubt that whatever comes after Obama, will be any better. In a few years China will keep them busy in other places.

And until then Merkel is the perfect point woman to let them get frustrated by running into the rubber wall, as with Libya, Syria, and the gigantic sanctions against Russia : – )

Comments are closed.