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A thread on how to fix the #Eurozone (and the #EU).
With the #RecoveryFund , the #EU has arrived to a pivotal point. Accepting the Fund would take us into a federation, while declining would, very likely, lead to euro-exits.
So, which option to choose? 1/20
With the #RecoveryFund , the #EU has arrived to a pivotal point. Accepting the Fund would take us into a federation, while declining would, very likely, lead to euro-exits.
So, which option to choose? 1/20
The #EU was established to end the wars and create political stability and prosperity across Europe.
Before the creation of the euro, it looked to accomplish just that. Europe started to grow together.
Unfortunately, euro has now reversed basically all that progress. 2/
Before the creation of the euro, it looked to accomplish just that. Europe started to grow together.
Unfortunately, euro has now reversed basically all that progress. 2/
After the Global Financial Crisis, the euro became, not the symbol of prosperity, but a symbol of poverty and human suffering.
Many member countries are now poorer than before the euro and some, like Finland, have never recovered from the GFC.
Moreover,... 3/
Many member countries are now poorer than before the euro and some, like Finland, have never recovered from the GFC.
Moreover,... 3/
…euro pushed the #EU to 'stealth federalization'.
The citizens of the #EU were never asked, whether they want a federalized Europe, but step-by-step EU leaders led us there.
Now, with the #RecoveryFund we are at the brink of a 'transfer union', which we never voted for. 4/
The citizens of the #EU were never asked, whether they want a federalized Europe, but step-by-step EU leaders led us there.
Now, with the #RecoveryFund we are at the brink of a 'transfer union', which we never voted for. 4/
It is obvious that:
1) The Fund will be too small to fix the €14 trillion economy of the EU, and
2) It will be used again, possibly very quickly.
Moreover, it creates a practice, where the Articles of the TFEU will not apply to economic emergencies, as they have before. 5/
1) The Fund will be too small to fix the €14 trillion economy of the EU, and
2) It will be used again, possibly very quickly.
Moreover, it creates a practice, where the Articles of the TFEU will not apply to economic emergencies, as they have before. 5/
Now, what happens if we push through the #RecoveryFund ?
First, the dissatisfaction of the northern citizens towards the #EU will grow, possible massively.
Second, southern members get accustomed to free money, and they will demand more of it in the future.
Then... 6/
First, the dissatisfaction of the northern citizens towards the #EU will grow, possible massively.
Second, southern members get accustomed to free money, and they will demand more of it in the future.
Then... 6/
...comes a point when some northern member says enough, because of increasing income transfer, and/or some southern member says enough, because it does not receive enough income transfers.
As the Fund ties countries tightly together through the budget of the EU,... 7/
As the Fund ties countries tightly together through the budget of the EU,... 7/
...the only way to leave is to default, and exit the EU.
Alas, country, or possible countries, exit the EU. This leads to a catastrophic chain reaction in finances of the EU.
There will be a big hole in the budget of the EU, which needs to be covered by remaining members. 8/
Alas, country, or possible countries, exit the EU. This leads to a catastrophic chain reaction in finances of the EU.
There will be a big hole in the budget of the EU, which needs to be covered by remaining members. 8/
If a southern country leaves, she will, most likely, default on her liabilities on the ECB, ESM and also to TARGET2 (im-)balances.
Alas, remaining members need to cover the losses of the EU and the ESM and recapitalize the ECB. 9/
Alas, remaining members need to cover the losses of the EU and the ESM and recapitalize the ECB. 9/
A massive mutiny among citizens of remaining northern members is likely to emerge.
This is likely to result to break down of the euro and the #EU .
Do we have an option? Naturally. 10/
This is likely to result to break down of the euro and the #EU .
Do we have an option? Naturally. 10/
We have to acknowledge, thoroughly, that the euro cannot be sustained in its current form.
It will, quite simply, be too costly, and there just is no support for a large enough (at minimum 10% of the GDP of the EZ) fiscal transfers from the North.
So, who should leave? 11/
It will, quite simply, be too costly, and there just is no support for a large enough (at minimum 10% of the GDP of the EZ) fiscal transfers from the North.
So, who should leave? 11/
#Greece, #Italy and #Finland .
They have never recovered from the 2008 'asymmetric shock' caused by the GFC.
The economy of Finland has suffered massively from the euro membership.
Greece's economy has been decimated by the debt crisis,... 12/ https://gnseconomics.com/2020/06/13/euro-markka-and-the-export-of-finland/
They have never recovered from the 2008 'asymmetric shock' caused by the GFC.
The economy of Finland has suffered massively from the euro membership.
Greece's economy has been decimated by the debt crisis,... 12/ https://gnseconomics.com/2020/06/13/euro-markka-and-the-export-of-finland/
...and the economy of Italy has been in steady decline since the GFC.
The exit of Finland is a 'no-brainer'. We establish capital controls and operate with European payment system, until domestic systems have been constructed. 13/ https://www.degruyter.com/view/journals/ev/15/1/article-20180020.xml
The exit of Finland is a 'no-brainer'. We establish capital controls and operate with European payment system, until domestic systems have been constructed. 13/ https://www.degruyter.com/view/journals/ev/15/1/article-20180020.xml
The exit of Greece and Italy will be trickier, however.
It should be noted that their exists would have been easier prior the "stealth federalization" of the Eurozone after 2010.
Especially Italexit threatens to drain all the capital of the #ECB and inflict massive... 14/
It should be noted that their exists would have been easier prior the "stealth federalization" of the Eurozone after 2010.
Especially Italexit threatens to drain all the capital of the #ECB and inflict massive... 14/
...losses to Bundesbank through the TARGET2 claims.
That's why the exit needs to be done in a mutually agreed way. The #EU can agree on a financial support package to Italy in exchange for the Italy no defaulting on her TARGET2 liabilities.
To help Italian economy... 15/
That's why the exit needs to be done in a mutually agreed way. The #EU can agree on a financial support package to Italy in exchange for the Italy no defaulting on her TARGET2 liabilities.
To help Italian economy... 15/
...her debts to the ECB needs to be rescheduled. This is the price, the ECB, and the EZ countries who supported the reckless and extremely destructive QE -policies need to pay.
Whether the former and current ECB leaders need to be indicted is a political question. 16/
Whether the former and current ECB leaders need to be indicted is a political question. 16/
Thus, the exit of Italy will create a need for a recapitalization of the ECB.
When the "trouble children" of the euro are gone, the rest can return to the no bailout rule, and an exit-mechanism from the euro has also been established.
There has not been a single... 17/
When the "trouble children" of the euro are gone, the rest can return to the no bailout rule, and an exit-mechanism from the euro has also been established.
There has not been a single... 17/
...currency union, which has survived without:
1) Income transfers (federal union), or
2) Exit-mechanism, where countries can leave the currency bloc at will.
By declining the #RecoveryFund and by letting the troubled economies out from the strait-jacket of the euro... 18/
1) Income transfers (federal union), or
2) Exit-mechanism, where countries can leave the currency bloc at will.
By declining the #RecoveryFund and by letting the troubled economies out from the strait-jacket of the euro... 18/
...we can fix the euro and keep the EU. It's a win-and-win!
If this is not embraced and supported by the leaders of the #EU , then we will know that their aim has, possibly from the beginning, been to force European citizens into a federation, against their will. 19/
If this is not embraced and supported by the leaders of the #EU , then we will know that their aim has, possibly from the beginning, been to force European citizens into a federation, against their will. 19/
In that case, there's only one option to save #democracy in Europe: Dismantle the EU.
That would be extremely unfortunate, but Europe will not work as an federation. It would impoverish us and turns us against each other.
We need to choose freedom, again. /End
That would be extremely unfortunate, but Europe will not work as an federation. It would impoverish us and turns us against each other.
We need to choose freedom, again. /End
