Eye of Providence about the EU
BSSB.BE Brain Bar 23/11/2018
* Do not confuse Europe with the European Union, suggests geopolitical expert George Friedman. But has the EU stifled or enhanced the Old Continent?
For more than six years we have been literally obsessed with crises. First it was American banks and other financial institutions that were in crisis. In late 2006, the floor fell out of the housing market. That market had previously been propelled by the growth of subprime mortgages, and the sudden turnaround hit banks and financial institutions. By the autumn of 2007 the waves of the American financial crisis hit the European shores. The bank run on Northern Rock was the first in Western Europe for seventy years.
The collapse of Lehman Brothers in September 2008 rendered clear that this was more than a temporary financial setback. The global financial markets came close to meltdown. Collapse was avoided thanks to massive interventions by public institutions. Massive amounts of private debt (fictitious capital produced by financial institutions in the previous decade) were nationalised at a very high cost to exchequers. Radical neoliberals such as Bush II woke up and realised that they had become the biggest socialisers in history.
Nationalisation was however resorted to not in order to transform society, but to preserve the value of financial assets. That did not do much to help the ‘real economy’ (the non-financial sector), and in late 2008 there was a drastic reduction of international trade that triggered a severe global recession.
The worst was avoided due to massive public interventions (largely thanks to the much maligned welfare states). For a while, there was much (cheap) talk of reforming capitalism. Such proposals were quickly shelved as political sentiment turned upbeat again. By summer 2009, there was general talk of ‘green sprouts’, or what is the same as recovery.
- The peculiar theme of growth through austerity became dominant. Then Europe became the main crisis scenario. A change in government in Greece revealed an enormous hole in Hellenic public finances (a hole that in fact predated entry into the Euro, and had been benignly neglected by international and European institutions in the late 1990s and early 2000s).
- The financial crisis mutated (or better, seemed to mutate) into a fiscal crisis which dragged the whole eurozone and indeed the entire European Union down. By 2010 the hype was the ‘spread’, the difference between what the eurozone core (Germany, the Netherlands, Austria and to a certain extent, Finland) had to pay for issuing public debt and what the rest, especially Mediterranean countries (relabelled PIGS, PIIGS or more euphemistically GIPSI) had to pay.
Just at the same time that European institutions and many scholars and pundits were celebrating the successful first decade of the Euro (which had allegedly sheltered Europe from the worst of a crisis ‘imported from America’, a claim that with the benefit of hindsight is cruelly humorous), the structural defects of European Monetary Union were exposed. The ideology that came hand in hand with the successful introduction of euro banknotes crumbled. The folly in the belief that monetary union had abolished economic crises was difficult to miss.
- The publication is not an editorial. It reflects solely the point of view and argumentation of the author. The publication is presented in the presentation. Start in the previous issue. The original is available at: Brain Bar