Showing posts with label EU. Show all posts
Showing posts with label EU. Show all posts

Sunday, September 4, 2016

World War II, nearly everybody lost

Czechoslovakia, Poland, Denmark, Norway, Holland, Belgium and France were invaded and occupied by Nazi Germany in 1940.  Yugoslavia and Greece got the same a year or two later.  Poland, Hungary, Austria, Czechoslovakia, Latvia, Estonia, and Lithuania were invaded and occupied by the Soviets.  Germany and Italy  were heavily bombed and then invaded and occupied by the Anglo Americans.  A few countries managed to stay neutral, but darn few. 
   We, America, won without taking too much damage.  The British won but suffered a lot more.  The Russians won at a terrible cost. 
   So on balance we have three winners, and a whole lotta losers.  Right after the war, 1946, the survivors (losers all), determined never to do a World War again, set out to build a United States of Europe to prevent another catastrophe. It started small, just six members.  It went thru a bunch of name changes, but it kept growing, and now everyone is in it, except the Russians.  They set up a Common Market, the Euro, and a government of sorts in Brussels.  Up until this summer it looked like a winner, despite some boondoggles like Greece. 
   This summer the Brits pulled out.  That's a setback for the United Europe idea.  Britain is the second biggest economy in the EU, right after Germany, they are very good diplomats, and they have the enormously strong American connection, far stronger than anyone else in the world.  Britain will be missed. 
   It will take some years for Brexit to sort out.  If no other country follows the Brits, then it's a minor setback.  If some minor players bail out that's a bad thing.  If a biggie, France say, bails out, that's a very bad thing.  
   Time will tell.


Sunday, February 28, 2016


Short for British Exit From EU. The Brits have set 23 June as the date for a nationwide referendum on pulling out of the EU.  British bookies are offering 2:1 odds that Brexit will happen. The Conservative party prime minister will campaign to keep Britain in.  He cannot get all the senior conservatives to support him. Heavy duty Conservatives like the mayor of London and the justice minister are in favor of getting out and have said so publicly.
   Prime Minister Cameron went to Brussels, dickered, and came back with some concessions from the EU. Britain will be able to refuse to pay welfare to new immigrants until they have been in Britain for four years.  There will be some poorly understood restrictions on immigration to Britain.  It probably ain't enough.  The Brits fear being overrun by foreigners and resent EU regulations on just about everything.
   Problem for Her Majesty's Government.  About one third of British exports go to the EU.  Right now they go duty free since Britain is currently an EU member.  If Britain pulls out, that stops and British exports to the EU will face full EU tariffs.  Which means the end of that huge export market.  The EU has 10% unemployment, which means plenty of EU suppliers who would be so pleased to pick up all the Brit's business after EU tariffs made the Brits noncompetitive.
   I did see one clueless letter to the editor in the WSJ claiming that it ain't so, Britain could pull out and still enjoy EU tariff preferences.  I don't believe that.
   The Economist is clearly concerned, they see economic disaster, of the lights go out and everybody starves to death sort.  They also checked with the bookies for odds.  I think the Economist is onto something.  Where do you go to replace one third of your export business?   Canada?  Australia?  the US?  Would we let them join NAFTA?
   Britain is the second largest economy in the EU.  If they pull out it will make the job of keeping the EU from falling apart harder.  Actually, the EU has come a long way since 1945, they have passport-and-customs free travel between most EU countries, they have a single currency, they have EU wide regulations of things like food purity and labeling, electrical safety standards,building codes.  They have a ways to go to become a United States of Europe, they have no EU wide foreign policy or armed forces, and the EU government in Brussels lacks a lot of powers that the US constitution gives to Washington.
   I wish the Brits every kind of luck.  They are gonna need it. 

Sunday, February 1, 2015


Jargon for Greek Exit from the Euro.  The Economist is highly concerned.   The new left wing Syriza government of Greece is making silly noises.  Economist has a good cartoon, showing the new Greek government barreling along a one lane mountain road in a steamroller, bearing a sign reading "Irresistible Force".  Coming the other way is a big 18 wheeler, filling the road from side to side, with Angela Merkel at the wheel.  Bearing a sign reading "Immovable Object".
   What will happen?  No one knows. 
   What ought to happen, is the EU tells the Greeks to keep sucking it up, or do without.  There is a multi billion Euro chunk of bailout money still due the Greeks.  The EU could, if it has the stones, with hold it if they don't like what the Greeks are doing. 
   The EU may not have the stones.  There are plenty of lefties all over Europe who dislike "austerity" (a balanced national budget).  The think if the Greeks drop austerity, it will be a signal to their own governments to crank up the welfare spending. 
  The other issue for Greeks is leaving the Euro.  This would enable them to print all the drachmas they need to pay for all the welfare they want.  At the stroke of a keyboard, all the Euro deposits in Greek banks would become drachma deposits.  And everyone expects the newly declared drachma to drop 50% or more against the Euro.  So every Greek with money, in the bank (maybe half of them?) is against Grexit.  Will their interests be strong enough to overcome the desire of the welfare staters to print all the money they want?

Monday, January 19, 2015

Greasing the skids

Greece, somehow has bamboozled the EU into giving them handouts.  After being allowed into the Euro back in  the 1990's, the Greeks managed to paper over their humungeous deficits by floating bonds.  Somehow, a bunch of sucker banks, mostly in Germany, was stupid enough to buy the bonds, thinking that they would get paid back on time.  The Greeks kept the illusion going by using the proceeds of the latest bond sales to the roll over old bonds. 
  This scam finally unraveled and every one, even the sucker banks, stopped buying Greek bonds, or making loans to Greece.  At this point, the Greeks owned so much money, that allowing them to default would cause intense pain thru out Europe.  The sucker banks cried that a Greek default would bankrupt them.  So, the EU decided to bail the Greeks out, a bit.  They demanded that the Greeks clean up their act, balance their budget, lay off the enormous number of Greeks on the Government payroll, and tighten up tax collection.  In return for promises to reform, the EU would give the Greeks enough money to pay the interest on their debts.  Which means that the sucker banks can carry their Greek loans as assets on their books.  If the Greeks stop paying, then sooner or later, the sucker banks would have to declare a whacking big loss.  A loss big enough to put a number of them out of business. 
   This stop gap situation may come unraveled this spring.  The Greeks have to hold national elections and the polls all show a new populist party Syrisa about to win outright.  Syrisa  is threatening to scrap all the promises of reform, and stop paying on Greece's foreign debt.  At which point the EU handouts will stop. 
   What happens to the EU and the Euro is unknown, but the Europeans are worried about it.  The Greeks will have to figure out how to live within their means.  They may decided to drop out of the Euro so they can print their own money, as much as they need, to meet payroll.  They may not, because all Greeks with any kind of money, in Euros, will be against the idea.  Dropping out of the Euro, would mean everyone's Euros would turn into Drachma, and then the Drachma would drop 50% or more against the Euro.  In effect, every Greek gets a real close haircut.  No one wants that. 

Sunday, January 18, 2015

Woe to the Brits

Britain is heading for another election.  They have the Labour party, the Tories, and a new rising power the United Kingdom Independence Party (UKIP for short).  The way the polls have it, UKIP will have enough votes that they will have to be taken into a coalition government in order to get a majority in Parliment.
UKIP is anti immigrant and anti EU.  They want to pull Britain out of the EU.  Since Britain does about 60% of her export business with the EU that could really smart.  Right now as an EU member, British exports go into Europe duty free.  If Britain pulls out of the EU, that happy state of affairs is over, British goods will face full EU tariffs, and there are plenty of continental competitors eager to pick up that business. 
   The way things look now, Britain is sailing into a sea of troubles.