Commence Operation “EU crack up,” phase two!

**Posted by Phineas

Phase One was the unending financial crisis that began in 2008 and the Europeans’ unwillingness to anything that would really address the problem, instead choosing to keep feeding the beast of debt and taxation. Sickened by the failure of their political class (and made delirious by their own addiction to the teat of the State), European voters are responding by throwing the bums out and putting radical bums in their places: a hack Socialist demagogue in France, and communists and neo-Nazis in Greece.

Now comes word that Phase Two, the bailout of banks in Spain has begun:

It was only a matter of time before the next bank bailout began despite all those promises to the contrary. Sure enough, as math always wins over rhetoric and policy, earlier this morning the shot across the Spanish bow was fired after PM Rajoy did a 180 on “no bank bailout” promises as recent as last week. From Dow Jones: “Spain may pump public funds into its banking system to revive lending and its recessionary economy, Prime Minister Mariano Rajoy said Monday, signalling a policy U-turn. The government had pledged to not give money to the banking industry that is struggling in the wake of a collapsed, decade-long, housing boom. “If it was necessary to reactivate credit, to save the Spanish financial system, I wouldn’t rule out injecting public funds, like all European countries have done,” Rajoy said in interview with Onda Cero radio stations.

Spain is Europe’s fifth-largest economy, and its economic problems are huge, but bailing out the banks won’t make much of a difference, if any; it will merely transfer the debt burden from Spanish banks to the Spanish government, which will have to borrow the money or seek its own bailout, further burdening both the already over-taxed Spanish public — as well as German patience. It’s robbing Pedro to pay Pablo, but the bill will still come due — and it will be enormous.

With the EU’s fragile unity already threatened by a likely clash between Germany’s Chancellor Merkel and France’s new President Hollande, will the added pressures of a potential Spanish financial collapse (which would make Greece look like a block party) push the European Union and the Eurozone to the breaking point?

My guess is for at least a partial breakup within the next year, as Greece and other fiscally profligate Latin states leave the Euro so they can devalue their currencies enough to restart growth, while Germany and the other “adult” states are glad to see them go.

But with the rise of political fantasists in Greece, France, and elsewhere, one wonders if that will be enough?

via American Power

(Crossposted at Public Secrets)

Sweet! If the Euro collapses, US taxpayers could be on the hook for $1 trillion! Oh, yay!

**Posted by Phineas

You know what they say, don’t you? A trillion here, a trillion there, and pretty soon you’re taking about real money.

James Pethokoukis posts about the risks for the US taxpayer in the Euro crisis, pointing that, contra Fed Chairman Ben Bernanke (1), the US bailout of Europe is on. I’ll refer you to Pethokoukis’ article for the details, but the gist is this: the International Monetary Fund, to which the United States is far and away the largest contributor, has already loaned Portugal, Greece, and Ireland (three of the five PIIGS countries) roughly $100 billion, of which our share is $20 billion. Petty cash these days, you say? Hah! We’re not done yet…

If the two biggest PIIGS, Italy and Spain, come to the IMF trough, their needs may exceed the IMF’s reserves, so the EU has agreed to loan hundreds of billions to the IMF, which the IMF could then re-loan to Spain and Italy (2) — loans totaling as much as $1.3 trillion. (They don’t call them “PIIGS” for nothing.) Since this is a loan to the IMF, the US taxpayer would be on the hook to European lenders for roughly 17% of that amount in the event Italy and Spain default, or as much as $220 billion.

Makes you wince, doesn’t it? But wait, it gets better!

The Fed is hedging their bets via currency swaps with the European Central Bank. Supposedly, in the event of a default by the borrowers, the ECB could limit US exposure by buying dollars, even if it meant devaluing the Euro through printing as much needed. But that assumes the Euro and the ECB even survive a real crisis. If they don’t, we’re on the hook for it all.

I’ll let James summarize:

U.S. taxpayer exposure is $220 billion via the IMF. That’s scary enough. But then you have the Fed. Lachman notes that the counterparty to the potential $600 billion in swaps is the ECB and that “one must suppose that the European Central Bank would be able to buy whatever quantity of US dollars that it might need to repay the Federal Reserve.” Unless there is a complete euro collapse and then there might not be a ECB to repay anybody. So in addition to a global depression and 20 percent U.S. unemployment, America [‘s exposure] would be nearly $1 trillion.

The insanity of it all becomes clear when one realizes this is like nothing so much as giving an alcoholic another bottle of booze and trusting himself to go on the wagon later. Really. This time he’s serious.

European nations have loaned Greece billions time after time, and yet the Greeks continue their profligate social spending and never reform. And the problem is spreading, as Italian and Spanish finances near collapse. But, instead of recognizing the desperate need to find an orderly end to the Euro so that debtor nations can devalue national currencies as much as needed to grow their way out of debt via exports, they keep trying to save it by buying their way out of debt with more debt. This only delays and makes worse the inevitable end: massive defaults, bankruptcies at major banks, and social chaos.

Now we’re getting into the act in a potentially very big and very harmful (to us) way. And on top of our own horrendous debt.

There is no easy way out of the international debt crisis, but surely the way to start is to stop being stuck on stupid.

Footnotes:
(1) Sure, Ben, we won’t bail them out directly. We’ll just do it through our seat at the IMF. That makes all the difference in the world. And I bet you’ll respect us in the morning, too.
(2) Anyone else reminded of a shell game?

(Crossposted at Public Secrets)

Why America is exceptional, a graphic example

**Posted by Phineas

I wrote in the last post of how Lincoln, in his Gettysburg address, captured the essence of American exceptionalism in the ideology of liberty that ties this nation together and makes it so different from almost any other place on Earth.

Well, coincidentally the Pew Research Center published the results of a survey examining the views of Americans and West Europeans on the role of the State and the individual. I think you’ll find the results interesting:

The difference is stark, wouldn’t you agree? Forget the Continent, where statism rather than liberty has been the rule and where the “Anglo-American system” (i.e., classical liberalism) is often held up as a bogeyman, but we’re almost polar opposites from our British cousins, from whom we inherited almost our whole political tradition.

And we’re seeing that play out in our national political drama, as time and again the majority of Americans have opposed the vast expansion of the federal government under Obama. When a truly large demonstrations took place here, it was against massive federal borrowing and the expansion of the state via ObamaCare. When people took to the streets in Europe, for example in France when the government proposed mild entitlement reforms, it was to demand an even bigger state and more “free stuff.”

The percentage preferring liberty to being coddled by the government is too low for my tastes, but it’s still a hopeful sign that we can largely avoid going down the same drain as the EU.

It also shows, in this case via social science rather than oratory, just how unusual we are.

via Dan Mitchell

(Crossposted at Public Secrets)

The view from Britain: comparing two constitutions, and our coming choice

**Posted by Phineas

While writing about the frightening proposal by former German Chancellor (1) Gerhard Schroeder for a fully-formed “United States of Europe,” the Telegraph’s James Delingpole made an astute observation about the differences between the United States Constitution and the European Union’s governing document:

In the US, they have a Constitution (one which the current administration would prefer to ignore, but still) which explicitly guarantees the constituent states in the Union the right to forge their own destiny. They can set their own local tax rates, their own speed limits, their position on social issues such as abortion, gay marriage, and marijuana consumption, and so on. This Constitution is what has made America great and Americans so free: and the two things are very much connected. When, for example, one state falls prey to rampant big government (eg California), there will always be other states offering a different sociopolitical model (eg Texas) – thus enabling free citizens of the Republic to vote with their feet. They will gravitate towards the model which best serves their needs – thus endorsing it – while fleeing the model they find less attractive, thus discrediting it. In this way bad political ideas cannot so easily take root in the US. Not at least so long as the Constitution is respected.

In the European Union, however, the Constitution serves exactly the opposite purpose. It is designed to give the constituent states as little freedom as possible to decide their own destinies; all decisions are deferred upwards to the controlling central authority; and when member states make the “wrong” decision, the EU superpower simply goes ahead and does what it wants regardless.

To give an example of this top-down control, the Library of the House of Commons in the UK estimates that fully half of Britain’s laws come, not from the democratically elected Parliament in London, but as directives handed down by the unelected bureaucracy in Brussels. Schroeder’s proposal, rather than creating a “more perfect union,” would instead cement into place a dictatorship of the nomenklatura.

One can’t help but notice also, and as Delingpole obliquely does above, that the Obama administration would very much like to institute that same Continental Model here — witness the actions of the EPA, the NLRB, and the FCC, just to name a few.

Keep that in mind come November, 2012. We won’t just be choosing a president, but the character of our union.

Footnote:
(1) And also a Putin crony. That should tell us all we need to know.

(Crossposted at Public Secrets)

Pat Condell: Europe needs a revolution

**Posted by Phineas

British comic Pat Condell rips into the anti-democratic European political class and the “European Union of Soviet Socialist Republics,” with an aside for some interesting observations about the nature of the American Revolution:

RELATED: At the Telegraph, Peter Osborne argues that the EU debt crisis will finally give Germany the empire it’s always dreamed of.

(Crossposted at Public Secrets)

In which I suggest a trade with the EU

**Posted by Phineas

Nigel Farage is the leader of UKIP, the UK Independence Party, which is a small-government, free-market party that advocates Britain’s withdrawal from the EU. He is also, like the more well-known Daniel Hannan, a Member of the European Parliament. In the following clip, he addresses the President of the European Commission, Mr. Barroso, on matters of democracy, national sovereignty, and border control. I think you’ll find he expresses sentiments that many Americans would agree with:

(BTW, the “star-spangled banner” he mocks is the European flag, not Old Glory, before anyone gets in a lather…)

Now, I don’t know much more about Mr. Farage other than the few speeches I’ve seen and the general platform of his party, but, since he’s a thorn in the side of the statists of the EU and most Americans aren’t fond of our own statists, I’d like to suggest a trade to our friends in Europe: you send us Messrs. Farage and Hannan, and we’ll (gladly) give you President Obama, the Congressional Progressive Caucus, and most of the members of the Congressional Black Caucus(1).

Deal?

via Hot Air’s Green Room

(1) Granted, there’s quite a bit of overlap between the two. Oh, and we get to keep Allen West.

(Crossposted at Public Secrets)

European Union to ban cars by 2050?

**Posted by Phineas

In order to fight a problem that does not exist, the monster under the bed anthropogenic global warming, the European Union is pushing to ban automobiles by 2050:

The European Commission on Monday unveiled a “single European transport area” aimed at enforcing “a profound shift in transport patterns for passengers” by 2050.

The plan also envisages an end to cheap holiday flights from Britain to southern Europe with a target that over 50 per cent of all journeys above 186 miles should be by rail.

Top of the EU’s list to cut climate change emissions is a target of “zero” for the number of petrol and diesel-driven cars and lorries in the EU’s future cities.

Siim Kallas, the EU transport commission, insisted that Brussels directives and new taxation of fuel would be used to force people out of their cars and onto “alternative” means of transport.

“That means no more conventionally fuelled cars in our city centres,” he said. “Action will follow, legislation, real action to change behaviour.”

Not surprisingly, the Association of British Drivers has had a fit at the idea, calling it “economically disastrous” and “crazy.” While they’re right, that’s never stopped Green Statists in the past. I mean, what could be more desirable to their ethanol-fueled hearts than striking a blow against climate change (ignoring that it’s a natural process they cannot control) and at the same time constraining the individual liberty –in this case, the freedom of movement– of the citizen even more? I’m sure EUrocrats all over the Continent thrilled at the very idea.

And so did the buggy whip industry.

And thus we learn the Green Movement’s motto: Forward, into the past!!

via Pirate’s Cove

(Crossposted at Public Secrets)

Truth to Power: “Just who the Hell do you people think you are?”

First it was Conservative Daniel Hannan shredding then-Prime Minister Gordon Brown in the European Parliament. Now we’re treated to Nigel Farage, Member of the European Parliament from the UK Independence Party, ripping the EU leadership a new one for their statist, anti-democratic arrogance in the Irish financial crisis. Sit back, my friends, and enjoy:

Rock on, Brother Farage!

LINKS: Roger Kimball, who thinks MEP Farage asked an excellent question.

(Crossposted at Public Secrets)

An infantilized society

The economic troubles in Europe are leading to public unrest, as EU governments try to pare back their bloated public sectors, in some cases trimming wages and benefits, in others by delaying access to them. In France, plans to save the national pension system by raising the retirement age from 60 (!) to just 62 has lead to a massive strike of over one million people:

French strikers disrupted trains and planes, hospitals and mail delivery Tuesday amid massive street protests over plans to raise the retirement age. Across the English Channel, London subway workers unhappy with staff cuts walked off the job.

The protests look like the prelude to a season of strikes in Europe, from Spain to the Czech Republic, as heavily indebted governments cut costs and chip away at some cherished but costly benefits that underpin the European good life — a scaling-back process that has gained urgency with Greece’s euro110 billion ($140 billion) bailout.

In France, where people poured into the streets in 220 cities, setting off flares and beating drums, a banner in the southern port city of Marseille called for Europe-wide solidarity: “Let’s Refuse Austerity Plans!” The Interior Ministry said more than 1.1 million people demonstrated throughout France, while the CFDT union put the number at 2.5 million.

(…)

French protesters are angry about the government’s plan to do away with the near-sacred promise of retirement at 60, forcing people to work until 62 because they are living longer. The goal is to bring the money-draining pension system back into the black by 2018.

As debate on the subject opened in parliament, Labor Minister Eric Woerth said the plan was one “of courage and reason” and that it is the “duty of the state” to save the pension system. He has said the government won’t back down, no matter how big the protests.

Prime Minister Francois Fillon reminded the French that it could be worse: In nearly all European countries, the current debate is over raising the retirement age to 67 or 68, he said. Germany has decided to bump the retirement age from 65 to 67, for example, and the U.S. Social Security system is gradually raising the retirement age to 67.

That sense of perspective was missing from many of the French protests, where some slogans bordered on the hysterical. One sign in Paris showed a raised middle finger with the message: “Greetings from people who will die on the job.”

Nothing like Gallic hysterics, eh?

Of course, we shouldn’t be surprised at this: statist societies like France and much of the EU use ever-expanding government-provided benefits as bribes to buy social peace, making dependents out their citizens and, in effect, infantilizing them. It’s no wonder, then, that the public then throws a tantrum when the state is forced to cut back.

But before anyone indulges in some schadenfreude at French expense, bear in mind that President Obama and his progressive allies want to take us down this same statist, dependent, and infantilized social-democratic road. (And, to a lesser extent, big-government Republicans have been willing to accommodate them.) We’re already seeing that with the growth of public sector unions in the US and their outlandish benefits*.

While Europe seems to be in for a season of unrest, the problem isn’t yet so bad in the US and, importantly, many people agree that it is a problem in the first place. Hopefully we can make the necessary reforms before we have our own mass tantrums.

*(For the record, I’m a member of a quasi-public union, and apparently it’s one of the dumber ones; we’ve never received the over-the-top wages and benefits the other unions do. I tell ya, it ain’t fair…)

(Crossposted at Public Secrets)