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Msg  28359 of 42454  at  4/24/2012 3:59:25 PM  by

zeno451


another pritchad assault on europe

Nightmare week for Angela Merkel as austerity bloc crumbles
Europe's political centre is starting to crumble, replicating the pattern of the early 1930s as the crisis ground into its third year under a similar mix of fiscal and monetary contraction.


By Ambrose Evans-Pritchard

Elected governments have already been swept away - or replaced by EU technocrats without a vote, indeed to prevent a vote - in every eurozone state where unemployment has reached double-digits: Spain (23.6pc), Greece (21pc), Portugal (15pc), Ireland (14.7pc) and Slovakia (14pc).
The political carnage has been striking. Ireland's Fianna Foil, creator of the Irish free state, has lost every seat in Dublin. Greece's Panhellenic Socialist Movement (PASOK) - torch-bearers of Greek democracy since the Colonels - has fallen to 14pc in the polls and faces ruin next month.
This week the tornado has smashed into the core, bringing down Holland's govenment and probably the French leader Nicolas Sarkozy as well in a cacophany of anti-EU diatribes.
Keynesians blame budget cuts, convinced that the pace of fiscal tightening - a net 2.5pc of GDP in Spain and 3.5pc in Italy -is beyond any sensible therapeutic dose, and already shown to be self-defeating in Greece, where economic collapse has left the deficit stuck near 10pc.
Monetarists blame the European Central Bank, accusing Frankfurt of tipping half of Europe back into slump by responding to last year's oil shock with rate rises. The effect was to compound drastic falls in real M1 deposits across Club Med, and trigger a credit crunch just as banks were slashing balances sheets to meet new rules. While the ECB has since launched its €1 trillion liquidity blast, this is not quantitative easing and has toxic side-effects.


The results are in: the hard-Left and hard-Right are on the rampage across Euroland. We have not reached breaking point of July 1932 when Nazis and Communists won over the half the Reichstag seats. That tragedy was the fruit of the Brüning deflation, rigidly imposed to uphold the Gold Standard - the euro's trial-run.
We forget now, but Germany was heavily indebted to foreigners in 1930, like Spain today. It was the refusal of the creditor powers (US and France) to reliquify the system and slow monetary contraction that pushed Germany over a cliff. The parallels are haunting, but the politics are more genteel this time - up to a point.
France's Marine Le Pen presents herself as a latterday Jeanne d'Arc, openly comparing France's pro-EU camp with the Burgundians who plotted "English Annexation" in the 1430s - or indeed "Les Collabos" who bought peace after 1940. "Let us break the chains of the French people. Bring on the French Spring," she tells Front National rallies.
The mood feels different from past episodes of irritation with EU aggrandisement, whether the "No" votes against the European Constitution in 2005 or the Irish "No" to Lisbon and Nice, or the Scandinavian "Nej" votes against the euro.
Mme Le Pen has gone to the heart of the matter, asserting that monetary union cannot be fudged, that it is incompatible with the French nation state. She has won 18pc of the vote campaigning to pull France out of the euro and smash the whole project. Unlike her father - who never seriously expected to be president - she has a realistic chance of peeling off enough Gaulliste votes to emerge as paramount leader of the French Right.
In Holland, the right-wing Freedom Party leader Geert Wilders brought down the coalition on Monday with open defiance against the "Diktats from Brussels". He too wants a euro exit. "We must be master of our own house," he says.
Whether Mr Wilders stands to gain in the snap election this summer remains to be seen. The eurosceptic Socialist Party is poised to snatch first place with fulminations against EU austerity. Labour and Christian Democrats, the two great forces of post-War Dutch politics, are sliding off the map.
What is clear is that the drive to slash the budget deficit from 4.6pc to 3pc during a deep recession has destabilised Dutch politics in ways that few in Brussels, Frankfurt or Berlin expected.
Socialist leader Emile Roemer said cuts on such a scale at this time "would only have plunged our country further and deeper into crisis". It would also risk a "negative feedback loop" in an economy with a housing slump, Club Med levels of unsold homes and EMU's highest household debt ratio.
Germany's Handelsblatt said Chancellor Angela Merkel is facing a "nightmare week" in EU politics as the austerity front breaks apart. She campaigned for Nicolas Sarkozy - in breach of diplomatic etiquette, after receiving bad advice on the likely outcome - only to face the prospect of a President François Hollande vowing to tear up the EU fiscal compact and bring the ECB to heel.
Her adviser Peter Altmaier said France risks "isolation". Some might retort that Germany looks isolated, confronted by a radically new constellation in Europe - perhaps a variant of 1936, when Leon Blum's Popular Front broke with Pierre Laval's "deflation decrees" and Gold Standard genuflections.
Mr Hollande leaves us guessing whether he really will lead a Latin Revolt and force Germany to make the fateful choice it has so long evaded: whether to allow fiscal and monetary reflation: or precipitate a strategic crisis and risk losing its diplomatic investment in the post-War order. Large matters, and Mr Hollande is no Leon Blum.


 
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