Finance ministers of the G7 group of industrialised nations have gathered in the French city of Marseille this weekend to discuss how to avert a looming global economic catastrophe, as markets continue their relentless plunge and deep divisions tear apart the European Central Bank (ECB).It seems bureaucrats are at long last realizing that a monetary union without a fiscal union cannot possible survive. This presents a two-choice dilemma.
But instead of the predicted economic debate, it emerged on Saturday that the bad-tempered meeting was dominated by American and British warnings that political failures and broken promises in the euro zone were in danger of triggering a wider crisis.
"Seventy-five per cent of the dark things happening in the world economy are because of the euro zone," said a senior US official after a round of talks ended in the early hours of yesterday morning.
George Osborne, the chancellor, also waded into the discussion, upbraiding the French, German and Italian finance ministers and central bankers for failing "convincingly" to implement measures agreed at an emergency euro summit in July - guaranteeing the size and powers of the eurozone rescue fund, and ensuring that Greece will not be allowed to default.
The clashes at G7, which put Britain and the US together on the sideline as members of the European single currency struggle to resolve its internal contradictions, foreshadow an autumn of disarray within the EU. Their parliaments must ratify the plan for the new EU rescue fund, which is unpopular with many voters, especially in the richer countries.
And just when scepticism among its population is at its greatest, there is finally a realisation among eurozone members that the only way to save the single currency may be a dramatic move towards more integrated economic governance.
To underline the growing fears that the single currency is heading for an existential crisis or crash - and as the G7 sat down at the conference table - the news broke on Friday afternoon that Jurgen Stark, one of the EU's most important policymakers, had resigned as the chief economist of the ECB.
Officials described the development as a "bombshell" timed to go off at the "worst possible moment" for French, German and EU attempts to bolster the fraying and tarnished credibility of the euro zone institutions. "There must be some kind of a euro death wish," said one official.
Two Choices
- Save the Euro and Destroy Sovereign Governments
- Save Sovereign Governments and Destroy the Euro
Given the propensity for government bureaucrats to mangle everything, there is a third possibility: Destroy the Euro and Destroy Sovereign Governments.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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