Bungling Politicians bring Euro to Breakpoint

Jacques Cailloux, the Sorbonne University educated Euro-zone economist warns the Euro-area is at ‘breakpoint’ with the sovereign debt crisis now threatening the entire zone ‘because policy makers still don’t understand market dynamics.’

German Logo of the ECB.

Logo of the ECB . Image: Wikipedia

The French-born and educated chief economist at the UK’s troubled state-bailed RBS bank has, according to the FTAlphaville blog, just released a report setting out disturbing short-term and end-game scenarios.

Cailloux’s RBS research team suggests Europe’s politicians are way behind the markets in understanding the depth and impact of the EU’s worsening sovereign debt crisis.

With Greece, Ireland, Portugal as the periphery, or softcore,  states already crippled, contagion is now threatening Spain, Italy and France (due to domestic bank exposure to troubled debtor nations) and indeed the whole EU edifice.

The timing of the RBS report is auspicious, coming just 48 hours ahead of yet another emergency Brussels summit called to allow EU finance ministers to fiddle while Athens, Dublin, Lisbon (and now possibly also Rome) burn on a banker-stoked bonfire. A rash of negative developments continues to plague debt-ridden EU member states, the latest being the cutting of Ireland’s credit rating to junk status.

Not content with the billions of euros, taxpayers have so far thrown at Wall Street and City of London banks to ‘save’ the financial system, the RBS report suggests the European Central Bank will have to become the eurozone lender of last resort. This is a move that Jean-Claude Trichet, President of the ECB has indicated he could only support if it were coupled with a power grab giving the ECB a veto over ‘ national economic policy decisions’ and leading eventually to a ‘confederation of sovereign states ‘. Never mind that French, Irish and other Europeans have, in referenda, already rejected an earlier EU attempt to corral them into a political union — the working thesis in Brussels seems to be ‘never waste a good crisis’.

Some last resort it is set to be!  The RBS report goes on to say the ECB, which of course is funded by eurozone governments — that is taxpayers — will need immediately to sink a further 2 trillion euros into underwriting bonds to save private banks faced by debt default in Greece and then, by accretion, the rest of the dominoes in this breath-takingly undemocratic game.

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