Tuesday, 8 June 2004

Eurosclerosis


The most certain aspect of social history is dramatic change

– Robert Prechter, auteur van ,,At the Crest of a Tidal Wave"

On the 3rd of June the Dutch foreign minister Mr Ben Bot held a speech at the Humboldt University in Berlin. He explained the European Union is threatened by falling apart and governments should evaluate whether the Union has not surpassed its original targets.

Finally a European minister has found the courage to see the reality and make it public as well. What Mr Bot has signalled is only part of the whole story, for the European Union is struggling economically, which everyone can see by just studying the figures. Economic growth has stalled, consumer prices are rocketing also due to the implementation of the Euro, opposition is increasing and the Eurocrats are keeping themselves occupied by plundering the coffers paid for by European taxpayers in view of sustaining their high salaries, tax free perks and phony declarations. This story has recently been published by the renowned International Herald Tribune.

What we see here represents only the beginning, because the EU is predominantly dependent on the United States for her exports and economic growth.. The US economy has stalled for the last couple of years,  thereby causing an enormous backlash in the European Union. Moreover, nowadays the Europeans need to compete with China on an industrial level and with India in the service industries. These latter countries are obviously much cheaper and more competitive than the arthritic Western European welfare states with their huge tax burdens and elaborate regulations.

Furthermore the governments of these old Union countries are even speeding up the relinquishing of the last monetary wealth by selling the remaining gold on the international market. E.g. The Netherlands has sold over the last 10 years about 900 tonnes of gold on the world market, hence diminishing the gold store from 1700 to 800 tonnes. This has been done in order to give more credibility to the paper Euro, other central banks in the EU have followed suit. Who are the ones who have bought all this gold, well you guessed it they were the Chinese, Indians and other Asians. So not only are the jobs being exported to East Asia, but also the European wealth.

Within a decade the Europeans will find out how impoverished they have become. Unemployment will have grown to a terrifying level and the EU economies will have entered into a deflationary spiral, similar to that of Japan. Due to the enormous paper money creation by the European central banks the Euro will have been washed away, together with the pensions and other old age entitlements. This will happen just when the baby boom generation is in dire need of this money for their retirement.

If we want to safe what we can, the euro-zone countries need to leave this ominous pact immediately and end their membership of the increasingly corrupt and nepotist European Union. The alternative could be a membership of the European Free Trade Agreement (EFTA), because this is purely a free market arrangement instead of a political union. When the countries decide to stay in the euro-zone then they are destined to become spectators of the inevitable economic decline of the Union, also known as ‘Eurosclerosis’.

Albert Spits

Albert Spits is a financial analyst and board member of the Frédéric Bastiat Foundation, a classical liberal thinktank based in The Netherlands.