Samsom's Naivety

Not cunningness but naivety is the most dangerous characteristic of a politician. In Het Financieele Dagblad on September 4, the leader of the Dutch moderate socialist party (PvdA) accused the previous generation of politicians of being naïve with respect to Europe. He is right. The monetary union was not built on a solid foundation, but on quicksand. Greece did not belong in the Eurozone, but was admitted nonetheless. This was considered to be 'pro European' ten years ago.

Samsom, of all people, continues the last generation's naivety and sells it as 'being honest about Europe'. He says: "I have a clear point on the horizon for nearly everything but Europe". Samsom lacks 'Der Blick für das Kommende', as Minister Rathenau (Foreign Affairs) of the Weimar Republic once put it. It is not hard to see what Europe is heading toward: a 'debt union' in which the Netherlands and Germany are the guarantors of the European 'debt mountain'. We are talking about amounts that dwarf the Dutch budgets for healthcare, education or social affairs.

The Euro made it possible for many countries to live beyond their means. Salaries rose too fast. Competitiveness decreased. The process of structural reform - lower salaries, pensions and government budget - needs time, but also determination. If this is missing, then the Dutch would work longer in order to subsidise the early retirement of the French, by guaranteeing 'European debts'. President Hollande of France calls this 'social' and 'pro European'; Samsom does too, apparently.

The Euro cardinals

To the euro system central bankers are what cardinals are for the Vatican: indispensible for the system. They talk in mysterious and coded language. Reports of the Governing Council of the European Central Bank (ECB) are not published, unlike reports of the American Fed and the Bank of Japan. To grasp the policies and motives of the ECB one has to resort to the skills of Vatican Watchers or retired Kremlinologists. Conflicts between cardinals are fought with venom and intrigue, as between central bankers.

There is a cold war raging between the German central bank, the Bundesbank, and the ECB. The core of the conflict is the euro crisis in which, according to the Bundesbank, the ECB is operating outside its legal mandate: price stability. Instead, the ECB gets increasingly involved in operations to save the euro. On July 26, Mario Draghi, President of the ECB, said in London that he will do 'whatever it takes' to save the euro. At the Bundesbank in Frankfurt all alarm bells went off. Jens Weidmann, President of the German central bank, gave a shot across the bow on the website of his bank: 'We are not just one of the 17 central banks. We are the biggest and most important.'

Whatever it takes requires, according to Draghi, massive ECB intervention on the state bond market. In the past the ECB purchased state bonds on the primary market, directly from countries like Greece, Italy and Spain to keep their borrowing costs down. That policy met the wrath of the Bundesbank. This time around, under fierce German pressure, Draghi had to backtrack. On August 2, following the Governing Council of the ECB, Draghi announced that the ECB will intervene on the secondary market of state bonds, only after a member state in trouble has invoked the support of one of the EU rescue funds: the European Financial Stability Mechanism (EFSF) or the European Stability Mechanism (ESM).

The Romney trip

Mitt Romney traveled to traditional U.S. allies, while his candidacy for president is gaining momentum. Three months before the presidential elections, it is a very close race between Romney and Obama according to a Gallup poll. The polling agency Rasmussen, which is normally very reliable, estimates: Obama at 44%, Romney at 47%. Foreign policy is not the main theme of the campaign - the state of the U.S. economy is - but it can certainly have an influence, in particular mounting stress in the euro zone.

A traveling American presidential candidate runs risks. George Romney, Mitt's father, immersed himself into the struggle for the presidential elections of 1968. In the primaries he was up against Richard Nixon. George, governor of Michigan, traveled to Vietnam and said afterwards that he had undergone “brainwashing” at the hands of military leaders. The seasoned Nixon did not pass on the opportunity to use this. Romney was portrayed as a brainwashed candidate with no experience in foreign policy. With Vietnam as the “main dish”, Nixon, the former vice president under President Eisenhower, got the ideal profile.

Mitt knows his family history and is instinctively cautious. Before his trip he said he was not going to criticize Obama. Obama himself did not show the same courtesy to the incumbent President Bush when he traveled to Berlin in 2008, calling himself a “citizens of the world”. Last month I paid a visit to some of Romney’s foreign political advisers, who mainly come from the foreign political establishment of the Republican Party.

Britain Bashing

Bashing the United Kingdom is the most popular parlour game of Brussels. Recently the President of the European Parliament, Jose Manuel Barroso, performed a theatrical act in the European Parliament, accusing the British of 'Schadenfreude' with the demise of the euro. The self-proclaimed pro-European Groups showered him with praise. While Brussels' frustration with the euro crisis grows, so does its aversion to the British. London is becoming the scapegoat of Brussels' failure. But London is in a state of confusion. There is no convincing concept on the future of the UK in the EU. In the meantime, its euro sceptic population is kept at bay with promises of a referendum.

Within the EU, power relations are changing along two fault lines. The first one is a gap between the members of the Eurozone and those who do not (yet) belong to it. Apart from the UK and Denmark, from a legal perspective all EU member states are either in the Eurozone or a candidate for becoming one. Most countries not (yet) in the Eurozone do not seem to be in a hurry to join. For the UK, resisting the euro was a matter of principle, automatically turning London into a target for the European elites who regard the euro as a crowbar to force a political union. The second fault line is a North/South gap within the Eurozone, featuring Germany as the prime northern country versus Southern Europe demanding transfers. The Dutch are in the same boat as Germany. The UK positioned itself outside this fault line, but at the same time its economic recovery is linked to the fate of the euro. London is a global financial centre and the British economy is suffering from the euro crisis. Prime Minister Cameron fears for his re-election because of the stagnating economy.

Plan B for the Eurozone

Tomorrow, European leaders will yet again convene for a summit in Brussels. It will be the summit of blackmail. In the midst of a political vacuum, Greece steers towards bankruptcy. Greek politicians blackmail the EU: 'more money, or else you'll see a chaotic default which triggers the end of the euro'. France blackmails Germany: 'no fiscal pact without a growth pact'. Spain and Italy demand euro bonds guaranteed by the AAA countries. German chancellor Merkel is isolated. All the spend thrift countries are ganging up against Germany (and the Netherlands) hoping thus to force a continuous monetary life support while confining future German (and Dutch) generations to a European Debt Union, to fiscal slavery. It is time for Plan B.

In his book 'War and Peace' the American economist John Maynard Keynes writes about the economic consequences of the Versailles Treaty. He quotes Lenin: 'There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency'. This is precisely what is now happening in the euro zone. Not brought on by Lenin, but by the euro itself.

There have been hidden structural deficiencies in the monetary union from the outset and now they emerge to haunt the EU. The euro has generated divergence because the monetary zone is comprised of too many countries with conflicting views on economic policy and too many wide-ranging monetary traditions. The cheap money flow- Mediterranean Europe borrowing money at German interest rates- increased labour costs, fuelled debts and crippled competitiveness. In addition, it also created a Spanish real estate bubble.

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