Budget7: How EU's Council of Ministers stole YOUR money in the E Coli scandal!

The Council of Ministers just slid a stealthy hand into your pocket -- and stole a euro. Think about it. Act 1: a score of people die in Germany from E Coli bacteria poisoning. Many more are hospitalized. Curtain for intermission. Act 2, the Council of Ministers quickly doles out 210 million euros of taxpayers' money to many countries around the EU. What happened in the intermission?

Who is to blame for the infection? An authoritative German source says it came from Spanish cucumbers. Let us call this source Herr Schmidt so we do not have to be personal. Many irresponsible people are involved. Herr Schmidt is a minister, an elected democratic representative.

Herr Schmidt says Spanish cucumbers are to blame. The Spanish farmers protest. Nonsense, they say, there is no trace of infection here. To no avail. The market collapses. No one will buy Spanish cucumbers, nor in fact any vegetable or fruit from Spain.

Then under questioning from the press and the agricultural interests, Herr Schmidt retracts his remark about Spain. But it is really a bit late, all fruit and vegetable markets around Europe have been hit. The public does not want to eat them out of fear of ending up horizontal in a morgue.

We now have a European crisis. What should we Europeans do? The Community is built up on the principle of solidarity. So would it not be a good idea to help the farmers from Community funds? In the meantime Herr Schmidt has gone on to blame bean sprouts, also without proof, and, who knows, a meteorite shower of bacteria from space!

But hang on! Who is responsible for the debacle? I would say Herr Schmidt is largely to blame for the scare. He did not say:

'What all consumers should do with all fruit and vegetables is to wash them well and cook them well as required. Bacteria die in boiling water. Wash your hands too! Eat safely like your mother taught you!'

No, Herr Schmidt started to blame an innocent party, causing hundreds of millions of euros damage. If any one is responsible it is Herr Schmidt. It makes better TV to blame and accuse rather than advise people on hygiene. If he was speaking for the German government as an official or employee then the German government -- and their budget -- is responsible too.

So how did the Council react? Does it lay the blame where it lies -- on Germany? No. It decided that all taxpayers in the whole of the European Union should pay for this German mistake. Why?

Like the quick movement of the magician's hands comes this very old trick. It has been done many times in the past. It is called political collusion. They call it Solidarity. They assume the people will be so dumb to think it means solidarity of all the citizens. In fact it is not that at all but solidarity of the political clique acting against the citizen, his money and his rights.

Consider the implications. The politicians are set to blame the citizen and say 'Collectively all the citizens are responsible financially'. That is rubbish. The politicians are responsible for the rumour. The politicians, so-called democratic representatives, do not honestly represent the citizen because they can point to no link of blame between the citizen and the agricultural market loss. In this case most of the citizens' real rights are best represented by consumer groups, taxpayers' associations or economic analysts and health-care groups, not the politicians. That is why Schuman and the Founding Fathers declared that organized civil society, such as these associations, should be a formal part of Community governance.

Financially there is a causal, financial and legal link between Germany, that is Herr Schmidt, bridging (1) the cause of deaths and injuries by E Coli and (2) the collapse of the market for cucumbers and other products across the EU and probably much further afield. There is no link with the taxpayer in the Outer Hebrides and the problem. Why then should a Hebridian crofter pay?

As far as I know, the Scottish crofters had personally nothing to do with it. They did not export lethal E Coli. They did not spread rumours or accuse anyone. Why should anyone in the Hebrides, or Rumania or Bulgaria compensate for a German problem? Why not the real culprit who started an authoritative but false scare?

Notice how the political class in the Council of Ministers defends themselves and takes YOUR money. Very quickly before anyone can reflect, all is decided. No debate in public. They decreed that 210 million euros should be taken from the European budget -- the taxpayers' money -- and be given to those farmers in Spain and elsewhere who were hit by the scare. Did the Council of Ministers ask the citizen? No. Did the European consumer express an opinion through the institution set up for this?

The body that should be defending the citizen and the consumer as well as the taxpayer, the Economic and Social Committee, is asleep on the job. In a supranational Community, democratic debate and legal opinions are required for all financial decisions. That involves governments, organised civil society, regions and the European Parliament. Under de Gaulle the Council tried to short-circuit this system. It is quite illegal and immoral to do so.

E Coli caused the initial problem. The rest is a man-made problem. More precisely, a politician-made problem. It has nothing to do with the weather, a flood or drought. Solidarity can legally be expected there and is welcome to help the hard-pressed farmers. But this case involves a single origin: ministerial 'foot in mouth' disease by Herr Schmidt. There is a clear causal relationship to Herr Schmidt for the real blame.

The Council compounded this problem with a crime. They stole money from the citizen, big time. They took money from all the citizens and gave it to someone else without asking the citizen. They took a euro from your purse or pocket! With 500 million citizens, 210 millions represents practically all the adult wage earners in the European Union. They stole one euro from just about everyone contributing to the European budget.

It is hush money. A bribe for silence. Just consider how unethical this is. What about the EU's neighbouring counties? Many countries, perhaps candidate countries for EU membership, also suffered from a loss of appetite for vegetables and fruits. They could not export into the EU. Many of them also suffered financial losses when all of a sudden the EU citizens said: "No vegetables on my plate and certainly not cucumbers!" Russia blocked its imports of EU agricultural products. Many exports were affected. This caused a problem for EU farmers but also the Russian consumers. They had to pay higher prices. Should the Council of Ministers -- who are very free and easy with other people's money -- send them a subsidy too???

Why, if this 210 millions subsidy was a just and fair policy, did the Council of Agricultural Ministers not spread taxpayers' money much further abroad? Why did they not send European cash around the world to places in Africa, South America and elsewhere -- which also took a financial hit as the German cucumber falsehoods were taken seriously?

The conclusions we should draw:

• Ministers and governments officials whether elected or not should keep their mouth shut on matters they do not understand. (That should save a lot of TV time! Public education about bacteria on TV is lacking.) The job of politicians is not to fill the airwaves with nonsense but to do their job. Sometimes this means keeping quiet. They should hush. The political class must be held responsible for what they say if it causes damage.
• Legal blame should be placed where the fault lies, according to the law. If some one is wronged he has access to the court. Why did the Spanish government not take Germany to Court? Each farmer has the right to take a case to Court in Germany. Now the Council has made a decision, they can also go to the European Court. The treaties say that European Court of Justice in Luxembourg is open for such cases, whether by the individual, an association, another European institution or a government.
• It is not the business of the Council of Ministers to short-circuit due legal process.
• It is not their job to give other people's money to resolve the problem of Herr Schmidt.
• Taxpayers’ money of the Outer Hebrides crofter or the Rumanian farmer should not be used as a bribe. The Council does not have a right, without democratic approval, to use the budget and give it to other governments to dissuade them from taking legal action against Germany or any other Member State in such circumstances.
• The Council should ensure as soon as possible that the Economic and Social Committee is elected on a European basis as a representative body for consumers, producers and workers. A non-party elected body is needed to give democratic legitimacy to any Community decisions so that a political clique is stopped from abusing Community funds.
• Government controls should see to it that irresponsible rumours are not started or if they are by accident, a quick denial should be published immediately.
• The media should act responsibly and not propagate rumours from irresponsible sources. They should analyse what shenanigans the politicians are up to.
• The German government should be responsible both financially and democratically for correcting the spread of rumours that cause Europe-wide or worldwide problems.
• Bacteria are not political. Scientists, not politicians, should determine the origin of E Coli strains. Impartial European scientific bodies should handle the scientific questions.
• The Council of Ministers is not authorized by the citizen to pay out European money to deal with problems that should be handled by national governments according to proper democratic systems.
• The Council of Ministers should investigate how they can recover the money they have wrongly distributed from the citizens' purse for non-European problems.
• The Council should stop acting as if the budget they have before them is their private money. It isn't. It is not to be used for resolving the political embarrassments of fellow politicians.
• And most importantly of all. The Council of Ministers should remember they are only ONE of the FIVE major European institutions that have to be engaged in a real Community decisions. It is not for them to act like a political cartel abusing the public.

The ministers of agriculture in the Council should limit their appearances before the television cameras to one comment:

'Keep your cucumbers clean. In turn we will keep our hands clean!'

Avalanche2 : Is Mr Soros right that the Euro crisis could bring about the destruction of the EU?

'The euro crisis could lead to the destruction of the European Union,' announced George Soros on 23 June 2010 in Berlin. Is the Hungarian investor/ economist right? He was right in 1992 that the British Pound Sterling was going to have to devalue by dropping out of the European Exchange Rate Mechanism (ERM). He made a fortune out of it -- about 1 billion dollars -- by short-selling Sterling. The UK lost more than three billion pounds. It is reported that the UK spent some 27 billion pounds from reserves in supporting the pound.

Will now the whole European structure -- created sixty years ago as the European Community -- implode? Is system that brought peace after two thousand years of warfare DOOMED?

According to Mr Soros the whole European experiment is under threat of destruction. However, according to Mr Robert Schuman, the originator of the system, it would last for a great deal longer than 50 or 60 years.

In Mr Soros's analysis: 'It can be seen that the euro crisis is intricately interconnected with the situation of the banks.' that provided loans to weak or vulnerable countries inside the EU. He names Greece, Spain and Ireland.

'How did this connection arise?' he asks.

His answer: 'The introduction of the euro brought about a radical narrowing of interest rate differentials. This in turn generated real estate bubbles in countries like Spain, Greece, and Ireland. Instead of the convergence prescribed by the Maastricht Treaty, these countries grew faster and developed trade deficits within the eurozone, while Germany reigned in its labor costs, became more competitive and developed a chronic trade surplus. To make matters worse some of these countries, most notably Greece, ran budget deficits that exceeded the limits set by the Maastricht Treaty. But the discount facility of the ECB allowed them to continue borrowing at practically the same rates as Germany, relieving them of any pressure to correct their excesses.'

I would put it slightly differently. Some governments tried to conceal their vital statistics so they could obtain loans by sleight of hand. Everyone in the country then thought then they could get away with the same deceit. Moral: governments should have the highest standards of probity, not the average manifestation of corruption. Secondly, everyone knows that not all governments have the highest standards. Certainly if banks accept paper promises of governments who are known to be cheating (some exposed for about thirty years), it is bound sooner or later to cause grief.

Take the example of the property boom -- what Mr Soros refers to as real estate. It requires a good dose of self-deception to believe that crumbling bricks and mortar have suddenly and universally become more and more valuable as an asset. Who is fooling whom?

Japan gave the lie to this property bubble deceit a few decades ago. The centre of Tokyo around the imperial palace briefly became worth much more than the entire American economy. The bubble burst. The property emperors had no clothes.

Japan is still paying for this folly. If some European governments have had to make sharp corrections for their folly, it is still rather less than the decades of woes that Japanese are paying.

Two economic laws are apparent. The law of the coming crunch: A proclivity to fiddle the books and spend produces (a) a desire for more money from silly creditors (which initially gives a false sense of security about profits) and (b) bad feeling among the creditors who then wake up will eventually cause many creditors to lose their patience.

The second is the law of the Community correction. The Community is designed as a closed system to expose dishonest dealing by governments or private sector banks -- and correct it. All members have the right to look at what sort of tricks the other members are up to. This is a fundamental feature of Community law. Any individual can under Community law take such a cheat to Court if his or her livelihood is affected by it. Usually it is States who take other States to Court, or the Commission.

Other members will eventually force the cheats to stop. It will all end in tears. However the Community system makes a huge difference. Happily, step by step, cheats are led to repentance. A totally reformed, former cheat welcomed back into the Community can become a solid example of probity for all the others.

The present challenge is small compared with the challenge of starting the Euro, as a common currency, in the first place. Much hard work has yet to be done as the Euro's creation was hardly based on authentic Community altruism -- the essential feature of the supranational principle. There remain several vulnerable spots. The exceptions governments give to the property market by governments is one example.

However, there is no question but that the European Community system will outlast its critics.

Am I being too optimistic? My assessment is not based on wishful thinking but scientific conclusions and hard facts. Which country is the keenest on sound currency principles? A clue: it was the country that had one of the worst currency problems in the past. Not just the Weimar inflation in the 1920s (when people carried their wages in wheelbarrow loads of useless paper currency) but also the experience which distorted the trade patterns for the whole of Europe with Hitler's economics in the 1930s. He had a hollow, complex, barter system creating political dependence and where other currencies were discounted to Hitler's rates.

Germany learned about sound currency in practice when it was given a democratic constitution in 1949. A year later it acknowledged a desire to join the European Community which reinforced sound monetary policy. The need for sound money began the moment that the first single market was opened. When did that happen? The exact date is 10 February 1953.

The European Monetary System was a logical part of the first European Community system that the Six governments and their peoples signed up to. The supranational principle, all the founding fathers said, provides the means for the democratic organisation of Europe, open to all countries 'free to choose'. That is what the Europe Declaration of Inter-Dependence says, the foundational document for the present European Union.

Schuman saw the European Community as a great democratic experiment, where the population would learn wisdom by pragmatic choice Sometimes governments make the wrong decisions, they are subject to apathy to introduce democratic measures -- like the mandatory elections they have never introduced. Sometimes they are corrupt. Some leaders may be autocratic. However, the European Community system is built to provide a positive learning curve for European civilisation, based on two thousand years of living and sometimes squabbling together.

But is this above analysis all the story? Is it even the most important factor in the present crisis? Was the 'euro crisis' fuelled and then ignited by the combustibility of low interest rates? Has something been forgotten? Is this a myopic economist's view that leaves out dire warnings made to European leaders consistently for more than half a century?

I hope to deal with that later.