2012 & the Mess called the Euro zone

Out of the 17 member states of the Euro zone, four currently face severe financial crisis. Spain, Portugal, Italy and Greece are in dire need of a strategy that will not only give them a life line but also, by extension, save the other member states and the global economy in general. There is a justification to be worried about how this plays out in 2012 for many reasons. Simply put, there is a domino effect if these nations are not saved in 2012. If they all fall, which is quiet certain, other countries, investors and institutions holding their bonds and options will fall. The holders span across the globe, thus the effect of their collapse will be felt far and wide. It is therefore necessary that steps are taken in the early days of 2012 to mitigate this from happening before it gets out of hand. The world economy cannot experience this recession spilling over into 2012, it just can’t! If it happens, God Almighty forbids it does, we might not recover from this one in the next 10 years!

                 

The European Union, euro zone or whatever it is called must be untangled! It can be a deliberated disintegration of the union by member states (the social and economic benefits far out way the cost) or a crash (which would be catastrophic for everyone in general). In my article dated 12 October 2011, I stated clearly how the union erred from the start; these reasons are still valid today. Only a well planned and constructive dissolution of the union will solve this erroneous mistake. The ECB has gone out of the confines of its responsibility to act as a lender of resort to defaulting nations; this was not its duty during the set-up of the union. The ECB was established to maintain price stability in the zone i.e. inflation rate. It failed in discharging this duty! Member states still have different tax system which the ECB has failed to harmonize since its inception; this problem has been a source of real concern for countries like Britain which never really wanted to allow the union dictate how it executes its taxation plan. Several Euro members i.e. the Netherlands, Belgium, also have different tax systems.

The zone itself is in discord; the old currencies have all of a sudden resurfaced and it is still a legal tender even though constitutionally, these currencies should have been laid to rest. The German Deutsche-Mark and the Dutch Guilders were both exchanged for products and services in the last 4 weeks. Households started to exhibit a preference for the old currencies as a show of independence and perhaps a salient request to revert to status quo. Will this voice be heard? Only time will tell.

People in the zone should start to speak out against the destructive plan to continue to allow the union exist. It will only end up hurting more people, the economic-political-social-scientist that started this experiment should know by now that the whole scheme has failed, woefully as a matter of fact! When a trickster nation such as Greece claims it will provide 150,000 new jobs in early 2012, concerned people should ask invasive question about how it intends to do so. The country has experienced no growth since 2009, in fact if we take the years 2000 – 2011, Greece has gracefully contracted in this eleven years (see chart below). Why does it think it can create jobs all of a sudden in 120 days? Greeks are known for evading tax, more than 70% of the youths have absconded to neighbouring countries in search of greener pasture and the Prime Ministers plan is to hire people within the ages of 55-65 years old! The PM said: new jobs! How will these folks work in new areas? The training cost money, the same one they do not have. Is this just another scam? They lied once, I’m sure they’ll do it again! Looking elsewhere within the messy zone, France’s rating has been downgraded; this will affect investor’s confidence and would definitely lead to a default in the months ahead. Spain’s monarchy has been hit with fraud allegations, even when the ECB is paying their debts and thousands are out of jobs, the only thing the royal family can do now is just steal what is left! How pathetic!

One begins to wonder if politicians have any good intentions at all for the people. Will we ever have politicians or so-called technocrats that say the truth, make realistic projections and plan properly? Or will we continue to have conniving money mongering people leading us to nowhere, apparently? In 2012, this type of behaviour should not be tolerated at all!