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So at last we have an announcement. There will be an amendment to an existing treaty; countries that break the new fiscal rules which are about to be rolled out will be punished.
What I am asking myself, is why does Angel Merkel thinks that countries that have previously broken the rules will now all of a sudden fall into line? If and when she introduces a European snooping squad with sniffer dogs -especially trained to spot financial transgressions - will she really pile on the pressure by summarily fining them?
How will she cope with the existing situation, where until now all countries including Germany have been allowed to break one rule or another. Will they all get retrospective punishments and how does she think the PIIGS will react unless they are given the proper time to change their ways ? Who says where the new starting line is, where the punishment starts and stops? Is the threat to go ahead alone with seventeen countries a real one ?
How will all this affect the EURO? Ah the all important question.
Take a look where the Euro is in comparison to the USD and GBP for starters. Against those two it will come down to the following. Ask yourself who has the most flexible labour laws, who can hire and fire at the drop of a hat, who has the unions under their control and can do almost what they want – including starting up the printing presses. And lastly who is less worried about running up their debt mountain ?
Answer the USA – there are sure to get out of this mess before the rest, because they don’t give a damn about the long term and will print in order to rebuild. Merkel on the other hand wants fiscal responsibility and prudence, she wants what should happen, but what we have been unable to achieve until now, because all of us, governments, companies and private individuals have been living above their means.
Merkel wants us to live within our means, which means we all live with less. Getting people to accept this in a Europe spoon fed on social welfare budgets the size of mountains large enough to make you blink is not going to be easy and it is not a job for the faint hearted. The social unrest may not yet have even started. Seeing people being chained and shackled down during the period of ‘correction’ may not be a pretty sight.
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