financeguy
ONE love, blood, life
When politics and economics collide, it is often said, the economics always ends up winning. The curiosity of the euro is that it has managed to defy this otherwise universally applicable rule; the politics somehow continues to triumph over the single currency’s self-evidently flawed economics.
Markets have reacted accordingly, by driving up rates to a level where the costs of refinancing and servicing Ireland’s national debt would make default virtually inevitable. If Ireland wasn’t bust before, it is now. Other peripheral eurozone economies could follow.
The Irish people have been betrayed by their European “friends” as surely as was Britain during the fiasco of the ERM in the early 1990s. Unfortunately for Ireland, there is no similarly obvious escape route. It cannot devalue its way back to growth. It is as permanently imprisoned in its eurozone sarcophagus as an Egyptian mummy in the Valley of the Kings.
But we are still light years away from the full-frontal federalism of the United States, for which there appears to be little appetite anywhere in Europe. The reason the resolution mechanism is being reformed is to address the fury of German taxpayers at being asked to bail out the profligate fringe. No European nation is ever going to subjugate its tax-raising powers to the interests of the whole, least of all the Germans.
The tragedy is that with both Europe and the US in a state of economic and political paralysis, the door is left wide open to the onward and upward march of China’s deeply sinister form of centrally controlled, authoritarian capitalism.
Time is running out for our liberal democracies. If they cannot come up with solutions soon, crueller alternatives may eventually prevail.
Ireland has been betrayed by its EU 'friends’ - Telegraph