EUROPEAN FINANCIAL CRISIS NEXT DEVELOPMENTS

EUROPEAN FINANCIAL CRISIS NEXT DEVELOPMENTS

 Very few options exist which could  resolve the problems and put the EU countries back onto a sustainable  future course.

The likely immediate steps to be taken, mainly by the ECB, which are cosmetic in impact and also appearance include, limited amounts of bond buying, a symbolic lowering of interest rates, adding token amounts to existing bail out funds, perhaps limited  ECB liquidity injections. The purpose of this incremental idiocy is to create the illusion of action when in reality the global situation is probably still deteriorating. It does however keep Mr. Draghi on the front page of the newspapers.

The amounts involved will be probably in EUR 100 Billion tranches, because nobody will dare say that the problem is in EUR Trillions.

The reality is that European politicians and the electorate still want to have their cake and eat it. They wish to retain national sovereignty and remain in the Euro zone, and not to suffer austerity while receiving hand outs. It is likely matters will need to get very much worse before the political elites, completely removed from the ordinary citizen’s reality, will get the message. Regrettably it will be the bond markets which will put an end to this game of make believe.

By the time they do the options will probably be down to the following:

• Full fiscal integration and loss of sovereignty for those that stay in the Euro zone, with the agreement signed in a railway carriage in Compiegne. For Germany “all things come to he who waits”
• Exit for all countries not willing to sign up to the new regime, hopefully when an orderly exit is still an option

The wild card possibility is that Germany exits the Euro zone taking perhaps a few Northern European neighbors with it.

While it is virtually impossible to predict the outcome, the only certainty with our completely incompetent leadership, is when the inevitable comes it will be an absolute catastrophe.

However the cake is sliced and diced, I do not believe the Euro zone will be intact at the end of this year. The question is how this will impact our lives. Many will unfortunately find themselves in the wrong place at the wrong time.

The theme of my next blog will be how can we thrive and survive in the resulting chaos