Wolf Richter On The Keiser Report
"Debtonomics and the NSA"

Wolf Richter on the Keiser Report
"Where Is The Fear"

Wolf Richter on Max Keiser's "On The Edge" 
"The Pauperization of America"

Wolf Richter on the Keiser Report
"Where the Money Goes to Die"

Clarke and Dawe: European Debt Crisis
Two favorite Australian Comedians

Clarke and Dawe: Quantitative Easing
Big industrial-strength printers, all facing the window

The Fastest Drive Ever Through San Francisco
Don't try to do this yourself

humanERROR - by "Frying Dutchman"
Powerful, lyrical appeal to the Japanese. Slams nuke industry, MSM, bureaucrats, and politicians.

« Stimulating The Public Sector, Suffocating the Private Sector: A French Dichotomy | Main | Is There Wisdom in the Crowd? »

Sacrificing The Will Of The People On The Altar of The Euro

The Eurozone debt crisis is exacting its toll. Convoluted undemocratic taxpayer-funded bailouts of bondholders and banks designed to keep the Eurozone together can’t kick the can down the road far enough. But the price has been huge, and people have expressed their anger in massive protests. Now, these efforts are also tearing up the fabric of the 27-member European Union: the first one out may be the UK.

If offered a referendum, 56% of the British would vote for a UK exit from the EU (with 34% definitely and 22% probably). Only 30% would vote to keep the UK in the EU. It wouldn’t even be close! It would be a landslide. Thus, if it came to a referendum today, the UK, a cornerstone of the EU, would bail out.

The EU has little patience with the will of the people. In most member states, decisions such as ratification of EU treaties, scrapping one’s own currency, or bailing out holders of sovereign bonds are made by parliamentary vote. But in instances, when people were finally given a vote, they had a nasty tendency to surprise the elite—the politicians, bankers, and unelected bureaucrats that run the show.

The Lisbon Treaty, the chef d’œuvre of the EU’s political elite, was supposed to repeal existing treaties and replace them with a European Constitution that would transfer significant national sovereignty to unelected EU bureaucrats and their institutions. Negotiations started in 2001, and by 2005, a majority of member states had ratified it by parliamentary vote.

But in France, the people got an opportunity to ratify it by referendum—after parliament had passed it with 93% of the votes. What should have been a cakewalk turned into an epic battle that split the Socialist Party in two. And the people, who loved their sovereignty and wanted to hang on to it, “unexpectedly” killed the thing by a margin of 55% to 45%. In the Netherlands, a similar scenario played out. 2005 was the year that referendum became a dreadful word in the European political lexicon.

The lesson was unforgettable: don’t let the riffraff decide. Such matters should be handled by politicians, bankers, and unelected bureaucrats. And so they did damage control. Many of the measures in the failed constitution were revived as reforms in a watered-down treaty. That was in 2008. As a precaution, the uppity people in France and the Netherlands weren’t allowed to vote on it. Irish voters were, however. And they killed it. They too wanted to hang on to their sovereignty.

But then the financial crisis hit. The Irish got scared. Their banks were in trouble. The economy was going south. So the referendum was re-run after the Irish government had negotiated some concessions, and the people changed their mind (the treaty became effective December 1, 2009).

European politicians dread a referendum more than anything. It threatens their power. Early November last year, at the margin of the G-20 meeting in Cannes, Greek Prime Minister George Papandreou tried to use that fear to extort more bailout money from taxpayers elsewhere. So he lobbed a single sentence with the most powerful threat he could think of: a referendum in Greece. He wanted to let the people vote on the austerity measures that would strangle them.

The threat knocked financial markets around the globe into a tailspin. The Euro plummeted. Italian and French yields spiked. It gave birth to a new word: papandemonium.

But it was dealt with swiftly. German Chancellor Angela Merkel and French President Nicolas Sarkozy summoned Papandreou to a French dinner. Afterwards, a dour-faced Merkel and a grimacing Sarkozy set out to squash the referendum. They’d cut off bailout payments, they said. And for the first time, they verbalized Greece’s exit from the Eurozone. It was a tour de force.

Parliamentary chaos broke out in Greece. Politicians in Papandreou’s own party rebelled against him. He got kicked out of office. And by the time the caretaker government took over, the referendum had been buried. Politicians just hate the idea of giving people an opportunity to muck up their delicate plans that had been hashed out with such finesse behind closed doors and had been laced with beautiful side deals.

That hasn’t changed. Not even in the UK. In one of the innumerable EU ironies, Prime Minister David Cameron, like all reigning EU politicians, would do everything in his power to stymie the efforts to hold a referendum. And if unable to stop it, he’d campaign with all his might to keep the UK inside the EU, though it would alienate a big part of his own voter base and much of the public.

The British have their reasons for being leery of EU governance that is encroaching more and more on their turf. Yet the EU has united 27 countries whose people had been waging war on one another long before the concept of nation state had even been invented. In that respect, and in many other respects, the EU has been a phenomenal success. Then the debt crisis erupted. And now that family of nations is threatening to tear itself apart over the euro that has become a religious dictum, and no price is too high to save it. Read....  The Curse Of The “Irreversible” Euro.

EmailEmail Article to Friend

Reader Comments (19)

The battle between neo-liberal capitalism and democracy begins in earnest!

Neoliberalism has strong affinities with belief in the "natural hierarchies should be embraced" school of political thought, which has affinities with old defenses of aristrocracy against those radical democrats and levelers.

The EU system is merely re-enacting an old battle at the heart of Europe's political development. It represents rule by "the right sort of people" over the dangerous masses, this time with a surface veneer of meritocratic openness to those not-to-the-manner-born.

But look at the audacity of what they are doing! They are systematically stripping countries of their social safety nets -- in the middle of a crisis that is economically sinking entire classes of people! Why are they doing this? To shift the costs of the banking crisis onto the non-elites, and to set up a technocratic European superstate that puts the interests of the elite above the touch of any democratic nation-state. Through increasingly tight treaties, the Eurozone nations will be smashed together into a de facto "super-market state", where their populations don't get to choose their own social-safety net "goodies" anymore (except, perhaps, in a few Teutonic areas). This superstate, forged more strongly in the crisis-level intensity of economic depression, will eventually allow some form of carefully-managed democracy to emerge, but by then Milton Friedman's glorious dream of completely subverting the nation-state to the power of international capital will be a fait accompli.

Or, more realistically, there will be a crisis of European disunion when the Euro splits, lots of banks collapse, and rightists blame that othner ethnic group for having destroyed the old-middle-class days and leftists blame "capitalist pigs". Blood will probably be shed either way.

Since the EZ must end in a superstate or be dissolved, I can't imagine much in between these scenarios. Either way, I'm betting that interesting years lay ahead of all of us. Yay us!
November 19, 2012 | Unregistered Commenteremptyfull
You got it pretty right. But if blood is our top priority to avoid, we shouldn't forget that in History, democracy in deep depression led to blood either. Democracy and depression elected Hitler. Minorities with serious causes can destroy democracy and then a planet. Democracy has proven limitations in saving nations and souls.
Should we better try knowledge in our century?
November 19, 2012 | Unregistered CommenterKonstantin Kayes
You cannot use what you donot have (that is another problem)>
November 20, 2012 | Unregistered CommenterRik
Europe has gone with things like the Euro over the line of what still works. The further it moves on with integration the further it moves from that line (and at the wrong side).
Look at the M&A practice bring 2 different cultures together and things will end in tears, here it is not different.

It has started to get into daily affairs of ordinary people without asking them if they liked/wanted that (as they didnot, as you stated) and without the structure to manage those daily affairs. And now they have also come to a point that local politics will be against further integration (because now it will take powers away there, before it was sort of convenient, they could blaim the EU for unpopular stuff).
If we get the further integration basically because of financial necessity, it will give a highly unstable construct. As it is not carried in society and by local management (that cannot be kicked out by the EU).

Because the EU moved further up the daily life ladder, especially through the Euro crisis it has become on top of the political agenda. And it will be there for at least the next decade. And as a consequence also on the voter agenda.
Therefor one way or another the people still will decide. May be not have all the choices, as the whole political class is pro-EU (allthough that starts to change see above) and may be not in all countries. But have an anti EU vote in 3 or 4 and the construct doesnot hold anymore under the stress it brought itself in.

There is a decade at least in which voters can effectively revolt and they will. Especially as you see that anti-EU parties set a lot of other wheels in motion. The traditional parties simply have to move or lose half their voters. Happened in Holland, happened in France before. Happens in the UK now. Thing got so much momentum that traditional politics cannot stop it anymore. Cameron will have to approve a referendum or next election he is out. He will have to face the EU on several issues like the budget and starts getting powers back simply because if he doesnot he is history (plus he has put a competitor-party on the map) and he has to start yesterday not in 2015. Simply forced by circumstances.
Same will happen in the South (Greece has already been a close call). Will also happen in the North in the age of austerity you cannot sell haircuts or semi-permanent transfers longer term, requiring extra cuts at home. When cuts will have to take place in say healthcare in Holland or France because of the Euro you get the party really started (hands up in the air, lighters on, 120Db minimum).

The problem politics will get is that they will likley not be able to avoid referenda or votes/elections on Europe/Euro. The issue plays too long (as said a decade or so and on the topspot of the voter agenda). While them dodging it will make people look more suspicious and themselves look less popular/credible. And like in Holland and France before it is likley to turn into a vote on the fact if the population is pissed off or not iso the issue itself (and they get in pretty pissed off). Politics is just changing the date they will have to face the music and the longer they wait the harder they will fall.

But at the other side of the spectrum is the fact that the platform to bring countries on a sustainable affordable footing isnot simply there. Basically a lot of people still think that all the entitlements are paid for by the wind and will be there forever. Plus the people benefitting from them have no plan B, no way back so they will fight (as we see). Who will hire a 60 year old, who did work only 2 of the last 20 years. Or a civil servant fired because five did the job of one and at inflated salaries. No one. Europe has created a huge class of entitlement addicts/economic criples and now no longer can afford them. But gives them the same right to vote and has organised them properly so they become a force.

Better than Shakespeare.
November 20, 2012 | Unregistered CommenterRik
My view is still that the EU is the right idea with the wrong governance. Europe is one culture. I feel closer to the Germans than I do to the Irish. Europe should be democratised from the roots up. To think that the financial oligarchy will not retain a firm grip on individual nation states if Europe fragments is naive . That it is absolutely in the interests of the US, South Asia, and China to see a weakened fragmented Europe should give pause for thought. Otherwise most that has been said about the present governance of Europe is accurate. I must say that I see little hope for a speedy democratisation of the Union. Parties like Syriza that are pro European but radical are the key. The people need to take control. It is definitely in the interest of Power to destroy the Union if they cannot retain control of it. Why help the crooks? The problem is that from the outset Europe was set up from the top down. If the peoples had been free to decide would there have been a Union at all? Or were they successfully manipulated into it? These questions make a European democrat like me acutely uncomfortable. So, OK folk, how best can Europe be demopcratised?
November 20, 2012 | Unregistered CommenterRoger Yates
My view is that the walls will come down in Europe basically because of a systemfailure. The system cannot react fast enough because the set up doesnot work.
As well that the systemfailures cannot be adressed at the moment because of huge conflicts of interest.
So we will see imho some collapse (most likely part of the EZ), the rest is linked in a so complicated way that is is technically nearly impossible to unlink it certainly under stress.

Re your idea. I would say look at what the people in the respective countries think is sustainably acceptable (carried by a majority and at least acceptable for most of the rest and over a longer period of time).
My guess is that will not be very much. The Euro and how it is handles (democracy as well as competence of the leadership, well lack thereof) simply takes all the enthousiasm out of people.
So not much more as an extended common market probably Customs union. Basically the business part of it. Business will be pro and likley it is very benificial for the economy.

But the rest. The majority donot give a damm about human rights for people they rather see go than come. The East like the transfers of course but the rest donot want to pay for it (if you would hold a referendum). CAp similar, farmers like the subsidies and incresed pricelevel. Rest (90+% donot want to pay for it).
Same with your Syriza. The are in it as they donot trust their own government and will not trust their own currency, not because they are good Europeans.
Solidarity in all sorts of ways is under heavy stress in Europe. People are scared for their standard of living. And looking at polls close to 80% want solidarity for as far as it comes their way. Not willing to pay for that to others. They are effectively more capitalistic than most entrepreneurs. This is a miss most left parties make. They think they have a mandate for solidarity. They have not they have simply mainly a mandate to protect the entitlements of their voters. When a party in the North moves to save the Greeks and we will pay for it they are butchered in the polls.
With Syriza it works imho because they want Europe to pay for it and people like that understandably. But the moment he would go for we have to reduce our standard of living anyway and the money should go to poorer people than the Greeks it will be back to zero.

A good time for change they will have to.
But a bad time for a new European Elan a democratic spring, people have enough of Europe and have become very introvert and mainly occupied with their own standard of living. Much more than in the US as the entitlement level is much higher in Europe abd the economic outlook much worse and a lot are still waiting for big brother to save them.

All are not absolutes of course, but these are clear trends.
November 20, 2012 | Unregistered CommenterRik
Correction: "the financial oligarchy" or alike WILL ONLY retain control over the individual states if the EU becomes more and more integrated. EU integration provides the simplest-to-use interface to acquiring and controlling EU entities and to making the EU as a whole dance according to a required political tune.

On a general note I believe this article is much ado about nothing at least to a EU citizen. Every time we switch on the TV screens or read a local paper we learn that another government action was taken that disregarded our interests as individual peoples or even as a Union. We have known it for over 10 years now. Moreover we also know there is no valid opposition in any of the member countries: german SPD votes with CDU/CSU or governs together, french socialists continue the same line as UMP (in spite of explosive language differences), english torries / lib dems trade individual and highly personalised political antagonism with the labour but nothing of substance, dutch socialists rule together with the liberals/conservatives aso. In the last 10 years most of the political parties melted into one single polical stream of politickers which insures the perenity of a unique pan-european political decision-making system whose main objective is faster and faster EU integration (euro salvaging is but one aspect of it). Those parties that have tried to avoid this "political integration" are being marginalised by the mainstream media or even through administrative measures (Die Line in Germany, FN in France and others).

The melting together of the opposition and the ruling parties leaves the peoples without protection and makes a mockery of democracy. I would find interesting an article that would explain why this is happening now, or perhaps it does not? it is just a bad dream?
November 20, 2012 | Unregistered CommenterTon
@Ton " The melting together of the opposition and the ruling parties " I have heard it called the extreme Center. Has it not always been like this? In the UK in the 50s and 60s both Tory and Labour were Welfare Parties far to the left of anything now. Basically the same party. It's called The Government. Maybe a level of consensus is no bad thing. I find it strange that on blog comments like these people from very divergent viewpoints have some agreements and common enemiies. Is the zeitgeist one of identifying common concerns. I am some kind of left anarchist at heart, with strong pragmatic instincts. And I find myself agreeing with folk ( Rik ) who are concerned about welfare entitlement. We need to be realistic and dream. We need to be realistic and dream. Shall I repeat that? Nationalism ( yes I know sovereignty sounds better ) is an old nightmare. The bosses will encourage the people into nationalism rather than see them unite in a structure like a democratic Europe.
@ Rik your pessimism has a horrible ring of truth. I do pessimism too. It goes like this : we are headed towards 6 degrees of global temperature rise in the lifetime of a baby born today unless we crash the growth/consumer economy NOW. That is not going to happen so we are long past the point of no return. The effects of the environmental collapse coming will make a major depression look like a couple of point drop in the Dow. It will not be then a matter of whether collective systems are efficient wealth creators in a growth paradigm or not. They will be the only game in town. All societies are collectives in wars and catastrophes. We need to be realistic and dream. There, I said it again........
November 20, 2012 | Unregistered CommenterRoger Yates
Fully agree that global warming will likely be a much bigger problem than this. At the end of the day comparing global warming with a financial crisis is comparing in the bar/restaurant industry the place burning off effectively without insurance and the thing going broke. The latter still leaves a restaurant and most of the people working there might at the end of the day keep their job under a new owner.
Even when the problem is made bigger than it is, imho you simply cannot run the risk it isnot (or it might be even bigger if eg frozen methan gets into the atmosphere). 50% chance of being shot is simply extremely risky.

Commodities both soft and hard are likely another one we use several times the stuff that max. a sustainable system could provide.

Problem will be in the East that nobody gives a shit they want a car. They are still in that stage. Might be that government interventioin can do something. But only very limited governments have effectively a credibility issue that is solved momentarily by buying support/votes by economic growth (aka a lot more CO2 and other crap).
West will use likely its resources to keep its own population sort of happy (as funding should be moved from where it is now as it is unsustainable anyway). Moving it to sources to generate (preferably non poluting) growth/R&D is a later worry for them (shouldnot be but it is). The West would need growth to have the extra money to pay for polutionprevention. The East needs polutionwise less money as it will be used to buy more stuff and polute more. However the economics look exactly the opposite hereof.

With Europe we hardly see anything even remotely close to dreaming. Only crisis mismanagement in a structure that is probably good described as 1960's. Half a century behind reality and moving into the wrong direction. Totally unfit to deal with the problems it is facing now, not even to mention to deal with the future. The solution will not come from there, they are probably more of an obstacle than a help. It will have to come from somewhere else.
November 21, 2012 | Unregistered CommenterRik
@ Rik This is rather shocking. Pour a stiff one.
November 21, 2012 | Unregistered CommenterRoger Yates
"Yet the EU has united 27 countries whose people had been waging war on one another long before the concept of nation state had even been invented. In that respect, and in many other respects, the EU has been a phenomenal succes"

It has only been a success do to their mutual terror of Soviet Russia, and the cocoon of US dollars spent on weaponry.
They are now just reverting back to their natural inclinations.
November 21, 2012 | Unregistered Commenterpeter
Ton (and Roger) - You're right when you say, 'Those parties that have tried to avoid this "political integration" are being marginalised by the mainstream media or even through administrative measures.'

The first part, the MSM... that's where we bloggers come in. We comment on things that the MSM tries to sweep under the rug. If there are enough of us, maybe we'll have some impact.

The second part, the administrative measures... that's the hardest thing to change. The FN in France (and I'm not a fan of them) may never succeed in being proportionately represented in the National Assembly. In the US we have a "two-party system"; the other parties (there are some, though you rarely hear about them, thanks to the MSM) have no chance.

This confirms Roger's point about the "Extreme Center." I think it has more to do with an unwritten agreement to share power and take turns exercising it, than with political direction.

Thanks everybody for your comments. Awesome reading!
November 21, 2012 | Registered CommenterWolf Richter
@Peter Many of the 27 EU states came in after the end of the Soviet Union. Russia should have come too. How's that for European Idealism? There has always been a strong centripetal force in Europe. The UK Royals are German in origin. The crowned heads of Europe were all related a century ago. That did not stop us fighting so we have had to move further in a natural direction. For all its faults the EU is an absolute triumph of good sense and progress. It has no equal in world history. To abandon it would be a return towards darkness.
November 21, 2012 | Unregistered CommenterRoger Yates
You should cover Europe more. Dialogue here is really interesting. I agree with Roger. No use to destroy the EU now. We must try to redirect European elite energy towards Strassbourg, away from Brussels. Hard enough.
November 21, 2012 | Unregistered CommenterAustrian
Sorry, these days you seem to be covering Europe a lot... :-)
November 21, 2012 | Unregistered CommenterAustrian
Austrian - just to change pace, and to dive into something lighter, I posted an article about San Francisco's epic ban on public nudity... well, actually, a "ban" the San Francisco way. I’ll revert to Europe soon.
November 21, 2012 | Registered CommenterWolf Richter
Good news: the Financial Times Germany had to shut down. One more neo-Keynesian bullshit outlet less. Germans are Austrians by instinct. This is the proof. Soros, Krugman, Buffet and the like lost a medium. Keep going bloggers!
November 22, 2012 | Unregistered CommenterAustrian
Maybe premature. Conflicting news. But they are in serious trouble. Good enough for now.
November 22, 2012 | Unregistered CommenterAustrian
Some really interesting facts and figures, but i can just pray that EU don't simply get destroyed. I think in such conditions every one trying to escape and save their own . But as long as we are together we can try to stay cool and face the difficulties side by side.
November 26, 2012 | Unregistered CommenterAimee

PostPost a New Comment

Enter your information below to add a new comment.
Author Email (optional):
Author URL (optional):
All HTML will be escaped. Hyperlinks will be created for URLs automatically.