When Will The European Union Collapse?

2011? 2012? 2013? 2015? 2020?

Who is willing to make book that the European Union as we know it will no longer exist within any of the time frames highlighted above? You think I’m reaching? I don’t. Why? Let’s navigate.

The core principle of the Prisoner’s Dilemma promotes that individual economic entities will act in their own self interest at the expense of a collective interest. We witness this dilemma at work within many economic circles in the world today.

Why do individual economic units behave in such a fashion? Often a lack of trust and a true sense of partnership will compel one economic unit– be it a state, a nation, or a trade bloc– from fully cooperating and embracing its supposed partner. While this dilemma is causing real conflict and friction in many parts of the world today, I believe the dilemma is most troubling within the peripheral countries of EU. Why so? 

When an electorate loses its voice and has formal economic policy dictated to it as in its best interest only to experience greater pain and anguish, you can rest assured the seeds of distrust and disintegration are being sown. I sense this reality is developing across a number of the smaller European nations at this very moment. You think I’m kidding? Let’s visit Finland and listen to Timo Soini the leader of the True Finns, a political party in Finland which espouses a populist and nationalist approach. The True Finns were previously an after thought but now represent a major political force in Finland.

In today’s Wall Street Journal, Soini writes Why I Don’t Support Europe’s Bailouts,

When I had the honor of leading the True Finn Party to electoral victory in April, we made a solemn promise to oppose the bailouts of euro-zone member states. Europe is suffering from the economic gangrene of insolvency—both public and private. Unless we amputate that which cannot be saved, we risk poisoning the whole body.

To understand the real nature and purpose of the bailouts, we first have to understand who really benefits from them.

At the risk of being accused of populism, we’ll begin with the obvious: It is not the little guy who benefits. He is being milked and lied to in order to keep the insolvent system running. He is paid less and taxed more to provide the money needed to keep this Ponzi scheme going. Meanwhile, a symbiosis has developed between politicians and banks: Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever more money back to our governments.

In a true market economy, bad choices get penalized. Instead of accepting losses on unsound investments—which would have led to the probable collapse of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs such as the European Financial Stability Fund.

The money did not go to help indebted economies. It flowed through the European Central Bank and recipient states to the coffers of big banks and investment funds.

We already know that the Federal Reserve was the ultimate backstop to the EU bailout of Greece structured a year ago. How has that bailout worked? It hasn’t. Greece remains on the precipice of default and the citizenry is increasingly buried with bills they will never be able to repay. Ireland and Portugal are in similar straits. Spain is not much better. Italy? I’m not betting on them. Soini offers as much,

Unfortunately for this financial and political cartel, their plan isn’t working. Already under this scheme, Greece, Ireland and Portugal are ruined. They will never be able to save and grow fast enough to pay back the debts with which Brussels has saddled them in the name of saving them.

I would expect that the the populist movement which elevated Soini and the True Finns in the recent elections in Finland will prove to be a precursor to similar electoral results in other nations, including here in the United States. Will those results drive real change or will central bankers overrun and overrule the political powers to be? Time will tell but I recall that during my trip to Ireland a few months back, I learned that more and more people in  Ireland are questioning why they would remain in the EU. Why would they slave under a debt burden which only serves to repay creditors–those being large international banks–who have done little to nothing to support the public interest.

When people experience a real sense of disenfranchisement, they will react not only in the voting booth but ultimately in the street.

Thus, I repeat my question. When will the EU collapse?

Me thinks that at the current pace of economic degradation within a number of peripheral nations the EU will no longer exist as we know it by 2013.

What do you think?

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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