The European Union and its “one size fit all” approach in the greatest economic and social crisis of the last 70 years proved itself to be unfit, disunited and counterproductive. Internal economic, cultural and political differences between north and south, east and west of Europe have become a factor in preventing exit from the crisis, and even for its deterioration, reinforcing nationalism, extremism and xenophobia equally in all countries of Europe, as EU members, as in their neighbors.
NY Times columnist Paul Krugman, Dr.Doom Nouriel Roubini, George Soros, Gideon Rachman in the Financial Times and many others warned the public of impending danger of non-functioning monetary and fiscal authorities in the Eurozone, which may result in losses of 1.000 billion euros, and complete collapse of the Eurozone which will throw the entire continent, and after him, the rest of the world in the greatest economic depression in history.
Reforming, relegitimising and restoring public confidence in their representatives and the stability and sustainability of the system, which will not destroy the achievements of the welfare state, the state of knowledge (free education) and solidarity for the benefit of blind and destructive financial capitalism, are a necessary alternative to the coming catastrophe. The text below follows the analysis of the Open blog.
Greek inevitable bankruptcy will follow the suspension of new loans from the ECB (European Central Bank) and EFSF (European Financial Stability Facility), as well as the cancellation of the contract with the IMF and World Bank. All of them will be watching and trying unsuccessfully to isolate Greece from the rest of the Eurozone. The key problem lies in the total capital of all euro area central banks, which is less than 100 billion euros, while it covers only Germany`s potential losses to Greece and the French losses could mount up to 80 billion. Pressure of too high interest rates and following causing of the bank run will force Spain, Italy and Portugal to withdraw from the European Monetary Union in order to avoid socialy unbearable internal government expenditures devaluation (salaries, pensions, health, education).
1.st Circle: Federal State of Eurozone
Undoubtedly, the ECB will have to resort to “quantitative easing” as they euphemistically called the printing of new euros, accepting the inevitable growth of inflation and depreciation of the euro, probably by 5-10%. These measures are taken at 2008. could have been sufficient, but now, they will have to serve only as a beginning of reform, together with a new Pact for growth to the new Fiscal Union and harmonization of labor and social rights (ironically, at the expense of the French) among countries of similar standards which are ready to create a new, stronger Union.
Crisis will force the Euro area to, modeled after the USA, form a “bad bank” that will take uncollectible debts, and recapitalize the big European bank to ensure liquidity. The problem of political support of citizens will have to be solved with significant democratization (greater powers for Europarliament, direct elections of the European Council and the President of EU) and the transparency of decision making (transfer of legislative powers from the Commission to Parliament, establishment of an independent European judiciary), which all mean adoption of the Lisbon Treaty changes. In short, Eurozone will become a single federal state with a democratically elected institutions.
Solid core of the EU, Euro zone, will consist of: Austria, Belgium, Cyprus, Estonia, Finland, France, Luxemburg, Malta, Netherlands, Germany, Slovakia, Slovenia.
There still will be countries that use the euro as their currency, and are not EU members, such as associated countries: Andorra, Monaco, San Marino, Vatican as well as Montenegro and Kosovo in CEFTA.
2.nd Circle: Confederal European Union
Countries that are unable to pay debts incurred by the State, which will have to be reprogrammed, and partly forgiven, will remain within the existing agreement, refraining from the adoption of the Stability Pact, which would have prevented their development, as well as “temporary and partial” quitting the EMU, while maintaining use the euro as a secondary means of payment with their new-old national currency: the Greek drachma, Italian lira, Spanish peseta, Portuguese escudo, the Irish pound. States shall settle their internal commitments in national currencies.
Countries that are not in the Eurozone (the Czech Republic, Croatia, Latvia, Lithuania, Hungary, Poland) will have to meet new and tougher conditions for joining the EMU and the rights to the newly established social transfers (assistance for employment and training, as a precursor of the European pension and health systems).
Both groups of countries will retain their place at the Euro-table, but without voting powers of the Euro area, and will not enjoy benefits such as joint eurobonds, the ECB and the euro as interest-free publishers, joint social programs.
3.rd Circle: Common Market of the European Economic Area
To reach a decision on the extension of the EEA, the key will be the fate of EFTA, which currently has only Iceland, Liechtenstein, Norway and Switzerland, modern and rich countries that have refused tighter integration with the EU. Now forced to tighter integration, countries that were part of the euro area (Denmark, Sweden), will have to choose between staying within the federal EU or return to EFTA, which will remain within the European Economic Area (Common Market).
Such a decision could be crucial for the preservation of Great Britain as a common state of England and Scotland, satisfying the partial interests of both parties. Ireland with its common law and Anglo-American tax system will become incompatible with the system of continental EU and will also be back in the EFTA.
Strengthening the system of “Threecircular Europe” it is realistic to expect Israel to join the EFTA and EEA, in order to strengthen its economic and political position.
Greece, as the first and most difficult case of euro-exit, will fare worst in the reforms of the EU. Her failure to fulfill obligations towards the EU will result in suspension of their rights (incentives, investments) arising from membership, forcing her to find investors where they only have, in Asia, including Turkey, Arabia and the BRIC countries (Brazil, Russia, India, China).
Leaving the system of the EU Customs Union, the Schengen been suspended, the future of Greece will be more linked to other Balkan countries, which have been linked within CEFTA. New stringent requirements, rules and accounting system with partizacije clientelism and government, will force Romania and Bulgaria to join CEFTA countries: Albania, Bosnia and Herzegovina, Montenegro, Kosovo, Macedonia, Moldova, Serbia.
Their decision will facilitate, partly to the inability of other countries that are progressing in the faster integration and raising living standards, the EU decision on acceptance of CEFTA in the EEA, a common market with the EFTA countries, which will stabilize the relations between the countries beyond the region.
CEFTA is an area of special interest to the Eurasian Union, dominated by Russia, and CEFTA will keep the common market (customs union) with it and continue to develop special relationships in areas such as culture and security.
4.th Circle: Intercontinental partnerships
“Eastern Partnership” will have to be transformed into specific and strategic agreements with the countries of Eurasian Union (former USSR), Turkey and other Mediterranean Union member states based on the principles of equality and reciprocity, in order to avoid destabilization of both parties.
“Atlantic partnership” is today nonexistent, but it is necessary to regulate the relations between the EU as a state union with the USA and Canada, and possibly Australia and New Zealand as part of the same civilization and economic circles. It is necessary to integrate new security institutions of the former Western Union, and now the EU system of NATO as a guarantor of stability and democracy, strengthening the role of the Assembly of NATO.
Without reforms that will allow faster integration of European countries that are willing and ready to be integrated more tightly, there is a real threat of blockade and the breakdown of the existing system, not only in Europe but also beyond, including Atlantic (NATO) and international integration (OECD, WTO, G8).