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Why you need to keep an eye on Europe this week – MoneyWeek

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Thepapershavebeenfullofpunditstryingtoworkoutexactlywhatkickeditalloff。

Doubtlessanumberofworriesarewhackingthemarketallatonce,fromfearsoverUSrecessiontoconcernsabouttherecentdowngrade。

Butofalltheworries,Europeisthemostpotent。

Andthebadnewsisthatthisweekisfraughtwithchancesformorenastysurprisesfromthecontinent。

Europehasthreechoices–noneofthemgood

GermanchancellorAngelaMerkelandFrenchpresidentNicolasSarkozyaremeetinguponTuesdaytodiscussthestickyproblemofEurope。

AmbroseEvans-Pritchard,writinginTheTelegraph,outlinesthethreeoptionstheyface:theycangoaheadwithissuingdebtjointly,whichwouldinvolveaconstitutionalrevolution,ortheycanforcetheEuropeanCentralBank(ECB)toprintmoney,FederalReserve-style,tobuybondsissuedbytheproblemcountries。

ThismighthelpoutthelikesofGreeceandItaly,assumingitdroveupinflationandhelpedtheireconomiestostopshrinking。

ButitmightnotsuitGermany,whichunderstandablyhashistoricalconcernsaboutmoney-printing。

Thethirdoption?

Theycantrytomuddlethroughwiththeirusualmixofhalf-measuresandbluster。

Thiswillleadtoarapiddisintegrationofmonetaryunionandabankingcollapse。

Giventheconsequences,youmightthinkthatoptionthreewouldbealastresort。

Butofcourse,itllalmostcertainlybethefirst。

Thisistheproblemyouhavewhentheeconomybacksitselfintoacornerlikethis。

Thedifficultyisthatthereisnogoodchoicehere。

FullEuropeanunionisadrasticstep。

Itwouldbeunpopularwithmanyvotersineventhemosteuro-friendlycountries。

Anditsalsounfair。

ApiecebyOstmarIssing–formerlyoftheECBspelttheproblemoutintheFinancialTimeslastweek。

HispointwasthatanyattempttocreatebondsissuedjointlybyEuropebasicallywouldletthelikesofGreeceoffthehookanddumptheGermantaxpayerwiththecosts。

Itisamoveonaslipperyroadtoaregimeoffiscalindisciplinedrowninghithertosolidcountriesinthemorassofover-indebtedness。

AsfarasIssingsconcerned,thatsnowaytopushforwardEuropeanintegration,becauseintheend,voterswillrebelagainstsuchunfairness。

WhyshouldGermanvotershavetopayforGreekpoliticalandeconomicpoliciesoverwhichtheyhavenocontrol?

Inthepast,criesofNotaxationwithoutrepresentationhavebroughtwar,warnsIssing。

RegardlessofyourstanceonEurope,youhavetoadmitthatIssingsgotapoint。

LookatthepressureourownlittlemonetaryunionhereinBritainisunder。

Post-Scottishdevolution,theWestLothianquestion(whichponderswhyScotspoliticianshaveinfluenceoverpurelyEnglishpolicymatters,whilethereverseisnottrue)hasbecomeevermoreproblematic。


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