Markets in Europe and futures here in the U.S. rallied off positive news coming from the EU summit in Brussels. German Chancellor Angela Merkel said; “We will achieve the new fiscal union. We will have a euro currency within a stable union.” The Wall Street Journal is already reporting that the leaders are deeply divided over key elements of their crisis strategy.
Regardless of what comes out of Europe in the coming days and weeks there is no hope for the beleaguered Euro and for that matter the economy it supports unless there is a long term commitment to a United States of Europe.
Former German chancellor Gerhard Schroeder said the following back in early September:
The current crisis makes it relentlessly clear that we cannot have a common currency zone without a common fiscal, economic and social policy. We will have to give up national sovereignty.
That’s it. Let me repeat. YOU CAN NOT HAVE A COMMON CURRENCY WITHOUT A COMMON FISCAL, ECONOMIC AND SOCIAL POLICY. Anything less will not have the teeth needed and will eventually force the demise of the European Union and its currency along with it. Merkel, Sarkozy, Draghi, yada, yada, yada can’t seem to get on the same page. Markets had been stabilizing on reports that the European Central Bank would authorize a major bond buying program. Central Bank President Mario Draghi dashed those hopes last week, sending a blow to markets around the world. Germany is talking tough but it was just a few weeks ago that a German Bond auction failed. If Germany can’t sell debt, where does that leave the other member nations?
Last week on CNN Secretary Geithner said he was encouraged by Europe’s progress. Well, I’m glad Tim is encouraged, but investors aren’t. Merkel has said that any pact will involve amending or re-writing the treaties that govern the European Union. Already with a summit underway, leaders across the continent are resisting even this proposal.
Instead of trying to repair treaties that clearly haven’t worked and will never work, how about writing a constitution or at least put together the frame work required to move in that direction. Will this take time? Of course, it will. It will take years to implement, but this is Europe’s only hope. Anything less will only delay the inevitable collapse and chaos that follows.
In 1946 speaking in Zurich Winston Churchill said:
The fighting has stopped; but the dangers have not stopped. If we are to form the United States of Europe or whatever name or form it may take, we must begin now.
Those words were spoken 65 years ago. One day at an Olympic event with fans cheering from the stands, we will hear the crowd chant: U*S*E*, U*S*E*.