[The EU needs a strong, dominant, charismatic 'character' to lead them out of this abyss]
The EU as a political construction is in a state of terminal decay. We know this for one reason and one reason alone: its core principle is the state is superior to its people. A system of government can only work over the longer term if it recognises that it is the servant of the people, not its master. It matters not what electoral system is in place, so long as this principal is adhered to.
The EU executive in Brussels does not accept electoral primacy. It shares with Marxist communism a belief in statist primacy instead. The only difference between the two creeds is Marx planned to rule the world, while Brussels is on the way to ruling Europe.
The methods of satisfying their objectives differ. Marx advocated civil war on a global scale to destroy capitalism and the bourgeoisie, while Brussels has progressively taken on powers that marginalise national parliaments. Both creeds share a belief in an all-powerful executive. The comparison with Marxism does not flatter the EU, and suggests it has a limited life and that we may be on the verge of seeing the EU beginning to disintegrate. Despite economic evolution in the rest of the world, like Marxian communists Brussels is stuck with a failing economic and political creed.
It has no mechanism for compromise or adaptation.
A rebellion from Greece was put down, the British voted for Brexit, which is proving impossible to negotiate, and now Italy thinks it can partially escape from this statist version of Hotel California. The Italians are making huge mistakes. The rebel parties forming a coalition government want to stay in the EU but are looking to exit from the euro.
As stated above, the EU is quasi-Marxist, placing the state above the people.
The Italian government has collaborated with Brussels to enslave its own people as vassals of the EU super-state. If there is a revolt in Italy, this is what the electorate is rebelling against. Faceless eurocrats tell the Italian people what to do and what to think. The people are discontent with both the super-state and their own weak governments.
It’s hardly surprising that the Italian people are fed up with their establishment and feel they can only collectively undermine it by voting against it at election time.
But it is too late, because the state, and therefore the banks, are already irretrievably bust, a fact barely concealed by the ECB’s funding of the Italian government at near-zero interest rates through the purchase of government bonds. Not only is the ECB in denial over Italy’s financial situation, but also Italy is firmly imprisoned.
EU banks are insolvent as well
The disruption of an Italian withdrawal from the euro would be fatal for the EU’s banking system on at least four levels.
- The support from the ECB for the Italian banks would be withdrawn, which would have the potential to allow a cascade of bank failures in Italy to develop, either as a result of bad debts crystallising within the system, or due to balance sheet deterioration from falling Italian government bond prices.
- Problems for banks will arise when past loans remain denominated in euros, while their balance sheets are transitioned into a new, weakening currency. The Italian banks lack the margins to weather lop-sided balance sheets, whose assets are denominated in a declining currency relative to the currency of their liabilities.
- There will be a rush for residents in other Eurozone countries to reduce and eliminate their Italian commitments, amounting to a banking run against the whole country. The only political solution would be to impose draconian capital controls between Italy and the rest of the world, including other EU member states.
- Lastly, there is the threat to the ECB and the euro-system itself.
If I am only half right over the timing of the next credit crisis, it will be at the same approximate time as Britain is due to exit the EU in March 2019.
Logically, Brexit should not be deflected by the credit crisis and the Eurozone catastrophe, but the statist instincts of the British government could be to put the whole Brexit process on hold in the interests of global government unity, at least while the management of the larger credit crisis is addressed. The coordination of policy at the G20 level seems bound to take precedence over potentially disruptive political issues such as Brexit.
So, despite the referendum commitment, even Britain may continue to be trapped in the rotting EU super-state for a while longer, defying the wishes of the electorate.
As foreshadowed in Hayek’s The Road to Serfdom, the EU and the British government will take the opportunity from crisis to increase their control over their individual peoples, eroding further the limited freedoms left to them.
Meanwhile, the British find themselves in a similar position to the Italians. The EU simply refuses to accept the British electoral mandate, because so far as it is concerned, it is not a matter for British voters. Brussels is reassured that there are powerful forces in the British establishment that will undermine Britain’s negotiating position. They are confident that Britain will never leave the EU, because it won’t be allowed. Consequently the British Brexit team finds it is trying to negotiate with that uncompromising brick wall.
The Marxist-like certainty in the EU’s position compares with the British lack of commitment to any sound position. The Conservative government only pays lip service to free markets, unwilling to argue the case for them. Nor can it stand up for the principal of democratic supremacy of the British electorate, which, despite the mantra of acting on the instructions from the referendum, it appears willing to compromise. It turns out that despite the efforts of Brexiteers such as Boris Johnson, the British government, like the Italians government, turns out to be a supine protoplasmic invertebrate jelly, which places its short-term survival instincts above its electoral responsibilities.
At this point, we can only surmise that, like the old Soviet Union, the EU’s political grip remains as firm as ever. The problem is that the denial of free markets and the supremacy of the super-state are gently rotting the EU from within. The Euro-sceptic instinct to abandon it for a more progressive world outside the EU is surely right. But the EU’s precariousness will only be fully exposed by the next credit crisis and the ECB’s monetary response to it, which will end up collapsing the euro.
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