A Belgian take on the euro crisis

On Wednesday, the think tank “New Direction”, which is affiliated to the ECR and the AECR (Alliance of ECR parties) organised a seminar on the euro crisis.  It warmed my heart to see all the posters around the building, with their catchy headline “The End of the Euro?”.

The main speaker was Johan Van Overtveldt, a distinguished Belgian economist, author and commentator.  He suggested five reasons why we should be concerned for the future of the euro, which I shall summarise briefly:

1  The eurozone’s July 21st agreement on a second Greek bailout:  It’s not clear whether we’re talking €440 bn or €750 bn, or indeed whether national parliaments will agree to it, or whether euro-bonds can or should be created.  In any case the amount would not be sufficient if a major member-state (Spain? Italy?) needed help.

2  European banks are undercapitalised and may have undisclosed losses or dodgy assets, primarily sovereign bonds of countries in trouble.   For this reason they have severe difficulties in raising funds in the international money markets.

3  Public finances.  Countries like France lack the firepower to bail out their banks.  While the top three US banks represent  around 35% of US GDP, the top three French banks represent about 250% of France’s GDP.  The USA could conceivably bail out its banks.  France could not.

4  Greece.  Greece is insolvent, and has no solution if it stays in the eurozone.  Portugal will become a second Greece.

5  In Germany, the Bundesbank is in open disagreement with the ECB. Overtveldt quoted Jacques Delors: “Not all Germans believe in God, but they all believe in the Bundesbank”.  It is extremely unlikely in the present environment that the German electorate could be persuaded to back any proposed solution involving euro-bonds, a debt pool and the ECB.

Johan Van Overtveldt also offered four possible future scenarios, in ascending order of probability.

1  More of the same: The eurozone will continue to muddle through.  But only if the ECB is constantly ready to buy up indefinite quantities of member-state sovereign debt.  If it does so, it will rapidly lose its remaining credibility.  As an aside, Overtveldt expressed the view that France could lose its triple-A rating any time now.

2  A “Quantum Leap” to full fiscal and political union (as urged by many europhiles, not least our friend Andrew Duff MEP, Lib-Dem — and suggested by senior Conservative politicians who ought to know better).  But this won’t happen, if only because Germany doesn’t want any more liabilities.

3  Exit of the weaker nations from the eurozone — Greece and Portugal at least.  In Overtveldt’s view, the only way the Greek economy can start to recover is by devaluing, which implies leaving the eurozone.

4  German exit:  More radical, but more likely in Johan Van Overtveldt’s view — Germany, with Austria, Holland and Finland, might leave the eurozone.

There would be one rather comical consequence of this move, doubly hilarious coming from a Belgian commentator.  If Germany and its northern partners were to leave the euro, then it’s a racing certainty that northern Belgium — the Flemish — would want to go with Germany, while southern Belgium — the Walloons — would go with France and the weaker south.

Many people have asked how long Belgium can hang together.  Others have seen a divided Belgium as an allegory for the larger European Union.  It would be hugely ironical if a break-up of the eurozone were to precipitate a break-up of the country regarded as at the heart of the EU.  And bear in mind that Overtveldt sees this “Scenario 4” as the most likely outcome.

This entry was posted in Uncategorized. Bookmark the permalink.

1 Response to A Belgian take on the euro crisis

  1. Timber says:

    Now I’ve been pretty good so far, during this crisis. I predicted that Italy would fall before Spain, a long while back. My predictions will be that the idealists will keep the present model, Greece will default, they’ll fudge it, but that will be the end.

    The Germans will keep paying, why? because they have an export driven economy and need weaker countries for competitiveness. Germany will only suffer with an EU breakup, especially with the other three richer countries on board and a resurrection of the Reichsmark (well, you did say some German’s don’t believe in God 😉 ), after the EU I don’t know if any countries would want to “join” a new union where Germany takes poll position, again.

    What’s the difference between Belgium and Italy I wonder, none, I think there could well be a split in Italy with the wealthier North splitting when Mr. B is ousted and they face the EU wide defaults with a sieve like border patrol to the south and constant transfer of money to support it – hell, even we could annex Scotland from the union in a couple of elections time.

    As for France, well, it’s pretty sweet to see percentages of debt in parity with Japan, that’ll teach those Socialist morons, stuff them. They’ll be on, what will it be now… their six republic?

    All the real Belgians have or are getting out to Luxembourg right now anyway, burning their Belgian national citizenship, it’s true they hate each other, but it’s happening already. All meaning to the country is being eroded, but that does give France greater size and wealth over Britain, especially if we contract ourselves. It’s not like the UK isn’t exposed to EU debt!

    Portugal will never come to its senses though, no, nothing will come of their former PMs traitorous behaviour toward it’s country, that part of the world never sort their problems out. There won’t be any Nuremberg trials for these lot, perhaps there’s a new market there for Russian.

    Ah yes, the accession countries, the ones who’ve gained the most from this expanding Empire. Well, as for the Czech Republic, it’s they I feel for the most – level headed and land-locked, damned if they do and damned if they didn’t, where do these countries go when the BRICs emerge?! I should think they would like to join this EU-lite.

    France out in the cold would be just desserts, there’s already unparalleled pessimism in any generation right now, that’s not like the French is it?! It’ll be tough times for all, but they’ll not change their stripes, it’ll be Socialism all the way, again, we’ll it wouldn’t be France would it otherwise. Chirac’s generation has a lot to answer for, but, he too will get away with it.

    I hope for the UK that, in the advent of further gains by UKIP, we get that referendum and we make enough noise all over Europe to give others the confidence to leave too and never think this EU can come about again, we don’t need no stinkin’ V Reich! Then on to bigger things, like Westminster controlling the whole of the UK or divisions for a generation or two, while tackling the Anglo-sphere’s other monstrosities like the UN and withdrawing from it. The BOHR will go and the BBC will be reformed into a domesticated cat, with a lot of venom from loyalists who trusted them, a lot of truths will have to come out.

    We’ll get a Nationalist resurgence, all of Europe will be extremely harsh toward immigration and by the time I die, well, things might seem like to their good old selves. So long as we rejoin the Commonwealth and continue to dominate it, which we will.

    Oh, China… don’t make me laugh, that place will be Kaput in forty years, with no easy route back, they have too high a population for it to be sustained by a single child policy, they’ve been reckless with their spending and irreversibly ruined their environment, too bad, but that’s communism. They’ll not escape a US default (this 2012 election will be their last, it’s “super” default time now for them), however Ron Paul could do a lot to ease the blow.

    Personally I see the real winners as the ever deserving and hardy Brazilians, the Indians too, which is beneficial to Britain. You can see it now with companies like Apple diversifying their manufacturing base to Brazil, but they are way behind, which give the Anglo-sphere time, again, to rebuild.

    Up the Anglo!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s