Turmoil in Europe is even more evident today as a result of massive debt, austerity measures and desperate bailouts. Everyone is currently holding their breathe in anticipation of an eventual Eurozone collapse however, some people are more pessimistic than others. Author Wolfgang Münchau for one believes that this Euro crisis will not be resolved for another 20 years. The Financial Times explains:
The summit made a concrete crisis resolution decision contingent on a future decision, which will be even harder to reach, and thus even more likely to fail.
They agreed that there shall be no common bank recapitalisation until a full banking union is established. And the Bundesbank has reminded us that the latter is not possible without a political union. The logical implication is that we won’t solve the crisis for the next 20 years.
The politics of the euro rescue has crossed an important threshold in Germany. A narrow majority is still in favour of the euro, but a majority is against further rescues. A group of 160 economists, led by Hans-Werner Sinn, president of the Ifo economics institute, last week published a manifesto against a banking union. It was full of sound and fury, but the importance of this document is that it reflects a consensus view.
Angela Merkel’s answer was revealing. She told them that there is nothing to worry about. The banking union was about joint supervision, she said. There will be no joint deposit insurance. She has a very different understanding of a banking union than the European Central Bank. At most, I expect this new banking union to cover the 25 largest banks, and leave those cajas and Landesbanken in national control. This is like an alcoholic who promises to drink only the better cognacs from now on.
If something is neither sustainable nor self-correcting, there are only two courses of action left. The first is to wait patiently until the situation breaks down. This is the strategy pursued by the European Council – and by alcoholics. The alternative is to start making preparations – and be careful not to trigger a breakdown in the process. It is hard to envisage an exit without breaching hundreds of national and European laws. This is why nobody is doing it. One would have to use a force majeure defence. One cannot prepare for such an event. It took a decade to create the euro. It will take more than a long weekend to undo it. A collapse would constitute the biggest economic shock of our age. But among a list of bad breakup choices, some are a better than others.
