In world monetary history, some currencies have lasted more than a
thousand years. That won’t happen with the present euro. Its
self-destruction is as certain as anything in politics.
What is now urgent is to reform the currency on a solid basis. It will be a world-beater. A sound currency must retain a long-term store of value. Like tax it must have means for taxpayers to have proper representation in its destiny.
This eurDemocracy commentary predicted more than three years ago
that the present euro will collapse. It is not due to Greece alone or other failing economies. The conclusion is based on Robert Schuman
‘s own analysis of monetary systems. It was also clear from debates in the 1990s. Then the currency’s essential democratic foundation
envisaged by Schuman and others was eliminated from the new euro design
by politicians who willfully ignored warnings of a future calamity.
The present euro system is fatally flawed democratically
It is not only the extreme left-wing Greek Syriza party (which is
nominally pro-euro) but the growing, powerful movements against
Brussels-based party political cartels that will dictate its fate. They
are vehemently anti-euro and in the foreseeable future will, in
governments, kill the project from within.
Only a higher degree of
democracy can save a European currency. It must show itself to the
benefit of all. It must demonstrably improve the common good. The European currency
'in the service of the people and must act in accord with the will of the people.' (c.f. Pour l'Europe, p55)
Secondly the present euro also has an economic illogicality in its
foundation, making it unworkable. How did it arise? Today’s failure
culminates from politicians arrogantly deciding that they could design a
better European monetary system than Europe’s Founding Fathers. They at
least were aware of the lessons of monetary history. The contradictions
are now bringing turmoil on the money markets and threatening the
political cohesion of the European Union.
Does that presage the end of the European Union? Not at all! The
supranational Community system is stronger than its currency — even a
flawed and suicidal one.
A new euro system will have to be built up based on sound economics.
In effect Europe’s leaders have another chance to change their present
failures into success and make the European currency the envy of the
world. The Founding Fathers wanted to see their currency not last just
for five or ten years but be stable for centuries. As designed, it would
outclass any currency in history– even ones that lasted a thousand
What currency applies in a Community system? A Community currency. A
supranational Community needs a Supranational Economic and Currency
System. A real Community currency would bring wealth and investment
unseen since the early Communities. Schuman, working as France’s Finance Minister, Prime Minister
and architect of the European Community, helped initiate the ‘Thirty glorious years’ after WW2.
- A system based on intergovernmentalism won’t work. (Europe is more than intergovernmentalism!)
- A system based on federal principles won’t work. (The EU is not a federation!)
- A system based on Optimal Currency Area theory won’t work. (Europe is based on freedom of choice!)
- A currency that requires a fiscal, that is tax, union, without proper democratic representation
won’t work. (The euroGroup is not even classified as a European
institution in Treaties and yet has become the governing body of the
- A European currency whose value and Central Bank policy are dictated by politicians and not by the market will always fail.
- A system without a proper supranational democratic control of its economy and currency won’t work.
The euro has had only five or six years of stable interest rates
across its Member States. It has been in crisis ever since. The
following graph from UCL gives the interest rates in excess of that
offered by German bonds in euro.
The Greek crisis is only one of many challenges attacking the
economic foundation to this euro system. It will certainly not be the
last. Other Member States are likely to present Brussels with similar or
worse problems in the near future.
A currency has to be based on public confidence. The flight of
confidence and trust is as fatal as the flight of capital from banks.
The present crisis, and those with Ireland, Spain, Portugal and Italy
have already exposed the fragile foundations. The process is under way
and the outcome is inevitable.
The European public is now divided into those who see the euro
continuing and those who see it failing. Those critics losing confidence
in the euro are gaining in numbers. Hence the numbers of those who see
it lasting longer are on a downward slope. The movement is in the
direction of continual loss of confidence. Consider the consequences.
Those who in countries like Greece fear for their future have already
involved in the multi-billion euro capital flight. They borrowed as
much as possible, then stored notes or transferred them, buying where
possible material assets abroad. They feared both that the Greeks might
bring in a new Drachma or that their euro deposits in banks might be
riffled as the euroGroup threatened to do during the Cyprus crisis.
European institutions sometimes made the matter worse. When European
Central Bank tried to support Greek banks, directly or indirectly, it
only accelerated the flight capital. Greek debts rose to some 325
billion euros, a third of this is flight capital.
What’s behind the Greek crisis? Three possible causes stand out among others:
- political immaturity or
- political sabotage.
The first factor is political corruption
. That is
far bigger than most people think. By corruption I don’t mean just the
Greek system. It was obvious from before Greek entry into the three
Communities in 1981 that Greece remained highly corrupt after the
dictatorship of the Colonels.
Parties of the Left and the Right tried too often considered
electoral victory as a means to load the bureaucracy and the
governmental system with their own supporters. Giving Greek bureaucratic
posts to party loyalists is as corrupt as turning the Commission into a
party political secretariat
. An effective civil service must be above politics and political ideologies.
Greeks have a long history of what is called in Brussels ‘party political parachuting
their buddies into the civil service. It also leads to internal
rivalries, turf wars and bribing. Externally it leads to paralysis.
Robert Schuman warned:
‘Amassing more officials is no guarantee against abuse … but is often just the result of favouritism‘ He said: ‘Administrative rigidities are the prime danger that threaten supranational services.’ (Pour l’Europe, p146.)
Greece also remained undeveloped as an economy, without proper
attributes of a modern economy. For example Greece lacked a proper land registry system
Brussels paid some 100 millions euros so that they could have one. The
money disappeared without a registry appearing. Brussels gave more
money! Who owns land in Greece? No one knows!
Nor does it have a fully working tax system. Yet these and many other
failures were known to all the politicians of the time, including the
In 1978 the then European Commission President, Roy Jenkins, said
that of the three Member State candidates, Greece was the least prepared
and the least qualified. Which then entered the Community system first?
Greece! Was it reformed? Judge for yourself! Joining the Community,
Greece availed itself of handouts supposedly to reform its economy. The
Brussels largesse led to the Karamanlis
and Papandreou scandals involving dirty dealings in the Bank of Crete
Thus corruption englobes the Greek governments of all stripes. But corruption also engulfs the European Commission. During the Gaullist years
, France lied about the Community’s origin, and denied Schuman’s key achievements. The Commission played Gaullist tunes
. France milked the rising German industrial power and the European Communities for all they were worth.
Under Roy Jenkins, a British Liberal politician, no real reform took
place. Governments decided that the Commission should be populated only
by party politicians, excluding all other citizens. This undermines
It is fundamentally dishonest. How? because none of the Commissions —
who are supposed to be the ‘honest-brokers’ of Europe — were honest
with Europe’s taxpayers. Commissioner-politicians dished out European
taxpayers’ money without proper controls. Commissions watched with open
eyes and closed lips while fellow politicians in other countries
committed fraud to buy votes. (They wanted to do the same.) They did not
insist on reform over Meat Mountains, Wine Lakes
phantom autobahns going nowhere, fraudulent national statistics, and
the fraudulent misuse of taxpayers’ money for political purposes.
Meanwhile they embraced corrupt politicians of left and right as
comrades and colleagues.
Under Jenkins the Commission decided to consider itself
overtly party political. The Commission was always a political body but
the Treaties forbade Commissioners to retain any interests,
- whether commercial or not,
- especially lobbying or other interests,
- party political membership,
- jobs, whether paid or not,
- and for three years after retirement not take up any employment in sectors of their Commission expertise.
In short they were forbidden from involvement in anything that might undermine public confidence. They have to show they are totally independent
as honest brokers. Clearly politicians who insist on retaining
membership of a group (like a political party) that lobbies and is
ideologically driven will lose public confidence and trust. Their
political enemies and non-party opponents of the general public consider
Honesty is paramount. The Commission as Europe’s honest broker has to
be honest. During the 2011 Greek crisis on the euro, the then head of
the euroGroup said: ‘When it becomes serious, you have to lie.
Other politicians besides Mr Juncker colluded in this nefarious mission
that undermined all public trust in the Community institutions. It only
made the Greek crisis worse and worse. Mr Juncker was not alone either
when he said of the referendums on the Lisbon Treaty/ Constitutional
Treaty : ‘If it’s a Yes, we will say ‘on we go’, and if it’s a No we will say ‘we continue’, we go forward.’
A travesty of Magna Carta
and Community Charter
rights! The treaty drafts were soundly defeated in referendums in
France and the Netherlands and were set for catastrophically higher
rejections in other States before they were denied the public.
And now Europe is faced with its most serious Greek crisis and another on/off referendum. In November 2011 Greek Prime Minister Papandreou proposed a referendum
on the euro crisis but was dissuaded from carrying it out. A referendum
is supposed to be democratic but the Syriza coalition government called a no-time-for-real-debate Blitz Referendum. It seemed
quite content to modify, postpone or abandon it and maybe their people and pensioners
too in their polemic against Brussels ‘blackmail
‘. So much for Greek democracy.
What of the second factor. Is the Greek government composed of immature politicians
The IMF chief Christine Lagarde famously commented that negotiations is only possible ‘when there are adults in the room.
Does this indicate unwillingness to negotiate or perhaps an alternative
strategy refusing to come to an agreement? The Greek government had to
pay 1.3 billion by the end of June to cover the IMF loan and avoid a
default. By not agreeing to anything the Greek government lost billions
of euros due to be returned to it on condition some sort of agreement
was made. These funds would have paid off a great deal of the Greek
debts, far more than the sums due before 1 July. This money is now lost
What of their skittish behaviour
? For the IMF’s negotiator Christine Lagarde:
“We have received so many ‘latest’ offers, which
themselves have been validated, invalidated, changed, amended, over the
course of the last few days, that it’s quite uncertain exactly where the
latest proposal stands,” she told Reuters.
Is this apparent confusion and incoherence due to the fact that the Greek government is a coalition and the Syriza party
itself is a coalition. It is a grouping of
social democrats, democratic socialists,
left-wing nationalists, feminists, anti-capitalists,
centrist-environmentalists, as well as
Rosa Luxemburgists and
Some of these radical neo-Marxist/ Communist groups have not raised
their heads in public in the West since 1968, others since WW1! Others
form part of the alter-globalist
movement aimed to fight the ‘neo-liberal’ IMF, International Monetary Fund.
We now come to the third possibility. Is there a neo-Marxist strategy
in the Greek action? The Marxist system has internal contradictions
that led to analysts like Robert Schuman predicting in the 1950s that
the Soviet Union would collapse before the end of the century. Classical
economists and historians also predicted that the Soviet system would
tear itself apart as it had no means to value objects, products and
services on the market. Hitler’s economy made similar errors and ended
in absolute failure.
The Soviet system had a ‘Gosplan’ setting production targets by
quantity (and often neglecting quality and demand). It also set their
prices (without market information!) It had no consumer feed-back!
(Complainers were class traitors!). As there were no free consumers, the
Gosplan had to copy prices on the free western markets. The private
enterprise system of the free market not only reduced prices but
incorporated technological improvements that left Soviets in a cloud of
dust. Maoists took an opposition stance against progress and Mao’s ‘Great Leap Forward
‘ ended in de-industrializing China and killing upwards of 40 millions.
Is the new Syriza working according to a common anti-banker plan? The
apparent changes of drafting documents, late arrivals and changes of
negotiators may be explained by coalition disagreements. They might equally
be consistent with a strategy to unnerve the Brussels negotiators to
gain time and ensure maximum capital flight and nuisance power. This is
also apparent in the violence of denunciations of Brussels: ‘blackmail
‘ and fiscal ‘water-boarding
When one party accuses the other of blackmail, it often means they
are really the blackmailer. In this case three financial institutions
and 17 euro Member States independently believe that they are
negotiating in good faith. Some like Ireland, Portugal, Latvia and Spain
have had similar conditions imposed on many of them. Now they are being
as flexible as possible to Greece. They are not blackmailing. So who is
Why nuisance power? According to Marxist dialectic
the new agreements with Brussels on the euro involve a new synthesis
that resolves the old problem (for example, debts, government
overspending, unworkable pension schemes, overpopulated civil service,
untaxed industries and corruption). The opposition force, (Brussels and
the bankers' 'neo-liberal'
creditor Troika) is called the anti-thesis. The Marxist dialectic
resolves the thesis
into a new synthesis
What then is the anti-thesis of the Marxist radicals? One new
synthesis would be the reinforcement of the link to the people against
the fiscal ‘water-boarders
‘. In other words, a referendum.
Sufficient extra complications, extra documents, new proposals and fresh
negotiation calls were submitted so that the Syriza government might
even withdraw from the referendum if they felt public opinion was
turning against them with the wrong answer. The referendum could be
cancelled if the Brussels Troika betrayed trust!
Was the referendum an act of desperation or part of a strategy? The
clues indicate that it was part of a strategy. First clue was their
reaction to the unexpected euroGroup meeting that Europe’s heads of
government declared AFTER the European Council of 25-26 June. It is
clear the Greeks were taken by surprise. In the middle
negotiations on Saturday, the Greek negotiators were called out of the
meeting. Their Prime Minister was about to announce the referendum.
They were stopped mid-negotiation. What sort of ultimatum/ blackmail is that?
The second indication is that the referendum document where the
people are urged to vote NO, has, as its annex, documents which were
being discussed on Saturday and are incomplete. Furthermore they are now
useless. The basis for the documents was an agreement to be made on 30
June at the latest. Thus the Annex on which the Greek voters are to vote
is legally useless!
The conclusion can only be that either the Greek government did not
read the text itself and they are incompetent, or that the Greek
government planned the referendum well in advance and were taken by
surprise. They assumed that they would have a legally valid, final
document published after the European Council that they could claim was
What is the end game for neo-Marxists? The final synthesis for
Marxist theory is the collapse of capitalism due to its internal
contradictions and the rise of the Workers’ State. In this, everyone
would get a minimum wage from some sort of fiat currency with no
material backing. The Soviet ruble was such a Workers’ currency. It was
neither stable (it was devalued several times) nor did it reflect real
values. It did not stimulate innovation by being a store of value. It
was also not the currency of the workers, as workers who had saved their
earnings immediately lost them in devaluations when the decimal place
was moved in their bank accounts. Nor was it controlled by the workers.
The Soviet Politburo decided when and how such decisions were made.
Many members of Syriza have long-standing relations with Russia, many
in families back to Soviet times. Curiously when Prime Minister Tsipras visited Mr
Putin the question of a Russian loan was not discussed. A Russo-Greek
gas pipeline was. The Russian monopoly gas supplier, Gazprom, is now
coming under scrutiny by the Commission for abuse of dominant power in
the gas market, where in some EU Member States it supplies the totality
of the gas.
One thing that Russia and many in the Greek government have in
common is the destruction of the European supranational law and Single
Market system. Russia could then play of one Member State against
another and gain the highest price in its bilateral contracts. Through
its energy geopolitics it could dominate all Europe
Russia and Greek debt are a major threat to the EU’s euro system. But
if you think the present crisis is bad, be warned! Worse is yet to come
before politicians see sense and it will get better.