ÿþ<html> <head> <meta http-equiv="content-type" content="text/html;charset=iso-8859-1"> <title>OnlineColumnist®.com: Putin Punishes Georgia</title> <meta name="generator" content="Adobe GoLive 4"> <style type="text/css"> .style3 { height: 68px; } .MsoNormal {} h1 {margin-bottom:.0001pt; page-break-after:avoid; font-size:12.0pt; font-family:"Times New Roman"; font-weight:normal; text-decoration:underline; text-underline:single; margin-left: 0in; margin-right: 0in; margin-top: 0in; } .style4 { font-size: large; font-weight: bold; font-family: Arial; } .style6 { height: 69px; } h2 {margin-bottom:.0001pt; text-align:center; page-break-after:avoid; font-size:12.0pt; font-family:Arial; margin-left: 0in; margin-right: 0in; margin-top: 0in; } .style7 { font-size: x-large; font-weight: bold; } </style> </head> <body bgcolor="white" vlink="black"> <center> &nbsp;<table cool width="624" height="2719" border="0" cellpadding="0" cellspacing="0" gridx="16" showgridx gridy="16" showgridy> <tr> <td width="133" height="118" rowspan="2" valign="top" align="left" xpos="0"> <a href="aboutdiscobolos.html"><img height="110" width="62" src="images/discobolos.logo.transp.gif" border="0"></a></td> <td width="7" height="118" rowspan="2"></td> <td width="482" colspan="2" valign="top" align="left" xpos="140" class="style6"><img height="75" width="450" src="images/banner.GIF"></td> <td width="1" height="118" rowspan="2"></td> <td width="1" class="style6"><spacer type="block" width="1" height="79"></td> </tr> <tr height="39"> <td width="182" height="39"></td> <td width="300" height="39" valign="top" align="left" xpos="322"><a href="aboutdiscobolos.html"><img height="14" width="267" src="images/divisionofNEW.GIF" border="0"></a></td> <td width="1" height="39"><spacer type="block" width="1" height="39"></td> </tr> <tr> <td width="624" colspan="6" valign="top" align="left" xpos="0" class="style3"> <table border="0" width="100%" bgcolor="black" cellspacing="0"> <tr> <td> <table border="0" width="100%" bgcolor="#99ffcc" cellspacing="0" cellpadding="4"> <tr> <td align="center"> <div align="left"> <a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> HOME</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> &#8226; <a href="articlesindex.html">ARTICLES</a> &#8226; <a href="books.html">BOOKS</a> &#8226; <a href="teflon.html"> THE </a><a href="teflon.html">TEFLON</a><a href="teflon.html"> REPORT</a> &#8226; <a href="mailto:letters@onlinecolumnist.com"> REACTIONS</a> &#8226; <a href="aboutdiscobolos.html">ABOUT DISCOBOLOS</a></strong></font></div> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr height="2"> <td width="133" height="2"></td> <td width="489" height="2576" colspan="3" rowspan="2" align="left" xpos="133" content valign="top" csheight="2573"> <p class="style4">European Union&#39;s Damage Control</p> <p><b><font face="Arial,Geneva,Helvetica">by John M. Curtis</font></b><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b><a href="books.html"><br> </a></b></font><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b> (310) 204-8700</b></font></p> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><i>Copyright May 22, 2010<br>All Rights Reserved. </i></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <p class="MsoNormal"> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <span class="style7">E</span>urope s 11-year high-stakes experiment with its common currency showed signs of cracking as euro disintegrated under the dark cloud of rising debt.<span style="mso-spacerun: yes">&nbsp; </span>Faced with an economic crisis paralleling the one in the U.S. in 2008, the European Union put the best possible face on an escalating economic crisis.<span style="mso-spacerun: yes">&nbsp; </span>Down 20% from its 2008 highs, the euro hit a four-year low against the U.S. dollar, before rebounding slightly May 21 on foreign exchange markets.<span style="mso-spacerun: yes">&nbsp; </span>Given the magnitude of the Greek financial crisis and prospects for more problems with other eurozone countries, the EU went into full-on damage control.<span style="mso-spacerun: yes">&nbsp; </span> The markets are trading in real time while the politicians are moving in bureaucratic time, said Mark Cliffe, chief economist for Dutch-based ING Group, seeing more problems for the euro down the road.<span style="mso-spacerun: yes">&nbsp; </span>Promising hundreds-of-billions in cash and loan guarantees hasn t reversed the crisis.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>EU s financial woes go well beyond Greece s recent default to the failure of the euro s one-size-fits-all currency to work equally well in Europe s less industrialized countries.<span style="mso-spacerun: yes">&nbsp; </span>Combining Gross Domestic Products into one mega-economic powerhouse, the euro worked well among world currency traders, convincing foreign investors a hybrid currency resulted in one super-currency.<span style="mso-spacerun: yes">&nbsp; </span> After its launch in 1999, traders bid up the euro quickly to the world s strongest currency, based on empty promises from Brussels-based European Council.<span style="mso-spacerun: yes">&nbsp; </span>After all, the EU had no common tax base or treasury from which to assess a real collective GDP.<span style="mso-spacerun: yes">&nbsp; </span>Boasting about stricter rules for debt, the European Council sold the euro as the world s premier currency.<span style="mso-spacerun: yes">&nbsp; </span>For a while it worked, until the over-valued euro drove less industrialized economies into more debt and eventual insolvency.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Demanding a debt-to-GDP ratio of 3%, Greece now faces a debt ratio of 12.7%, unable to meet its salary and pension obligations.<span style="mso-spacerun: yes">&nbsp; </span>Greece s debt promises to get far worse despite austerity measure imposed by the EU.<span style="mso-spacerun: yes">&nbsp; </span>Sold as an economic engine of prosperity, the euro now forces Greece into economic slavery to the Stuttgart-based European Central Bank.<span style="mso-spacerun: yes">&nbsp; </span>Greece must beg the German-based European Central Bank for cash, forcing Germany, France and other more prosperous countries to share the debt.<span style="mso-spacerun: yes">&nbsp; </span>Desperate to stem the euro s downward spiral, EU finance ministers agreed on  sanctions for countries, like Greece, Italy, Portugal, Spain, Ireland, etc., that exceed recommended debt ratios.<span style="mso-spacerun: yes">&nbsp; </span>Economically troubled economies are not in a position to endure more hardship imposed by EU central bankers.<span style="mso-spacerun: yes">&nbsp; </span>It s either all-for-one or none-for-all to preserve the euro.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><span style="mso-spacerun: yes">&nbsp;</span>Sanctioning Greece, already reeling from massive debt and forced to cut government salaries, pensions and welfare programs, surely restarts violent protests in Athens.<span style="mso-spacerun: yes">&nbsp; </span>While Germany approved the Greek bailout, France hasn t yet signed on to the 750 billion euro or $937 billion package of cash and loans, designed to stave off a Greek bankruptcy.<span style="mso-spacerun: yes">&nbsp;&nbsp; </span>Brussels European Council and Stuttgart s European Central Bank are often at odds with sovereign governments, despite presenting a phony unified front.<span style="mso-spacerun: yes">&nbsp; </span>Fears over the euro s fate plummeted the value of government bonds and drove up interest rates.<span style="mso-spacerun: yes">&nbsp; </span>Eurozone banks face the same kind of credit freeze or cash crunch that paralyzed U.S. financial markets in 2008.<span style="mso-spacerun: yes">&nbsp; </span>Brussels has done some fancy PR to reassure investors that the eurozone will survive its current debt crisis, rattling nerves on both sides of the Atlantic.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Offering a lucrative bailout package was designed to reassure investors that<span style="mso-spacerun: yes">&nbsp; </span>Brussels was pulling out all stops to save the euro.<span style="mso-spacerun: yes">&nbsp; </span> The markets have been concerned about unilateral action and a lack of solidarity, said Cliffe, calling the EU s actions  a smart move, the first time they ve got ahead of the curve. <span style="mso-spacerun: yes">&nbsp; </span>Some economists question whether the EU s moves are too-little-too-late to reverse an inevitable decline based on the eurozone s long-term failures.<span style="mso-spacerun: yes">&nbsp; </span>Europe s industrialized countries, like Germany, France and Netherlands more easily translated old currencies into euros.<span style="mso-spacerun: yes">&nbsp; </span>Less industrialized countries with under-valued currencies got short-changed in the 1999 conversion.<span style="mso-spacerun: yes">&nbsp; </span>Countries with weaker economies eventually couldn t fund government salaries and pension funds with euros, piled up more debt and eventually ran unsustainable deficits</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>EU s $937 billion Greek rescue package, backed by Germany and France, postpones the euro s day of reckoning for the immediate future.<span style="mso-spacerun: yes">&nbsp; </span>Kicking the can down the road buys the EU more time, while it figures out an exit strategy for eurozone countries unable to afford <span style="mso-spacerun: yes"> &nbsp;</span>the euro.<span style="mso-spacerun: yes">&nbsp; </span>Pending insolvencies in Spain, Portugal, Italy and Ireland pile up more debt and further erode the euro s value.<span style="mso-spacerun: yes">&nbsp; </span>Yesterday s temporary surcease in no way reverse the euro s continued decline, where Europe s growing debt harms the sovereign wealth of the eurozone.<span style="mso-spacerun: yes">&nbsp; </span> The eurozone cannot survive as it is at the moment, historian Timothy Garton Ash told BBC radio, predicting more financial problems for the eurozone s weaker economies.<span style="mso-spacerun: yes">&nbsp; </span>No amount of bailouts by the ECB changes the heavily leveraged and socialized economies, whose debt burdens threaten to take down the euro.</p> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <bAbout the Author</u> <p class="MsoNormal"> <b>John M. Curtis </b>writes politically neutral commentary analyzing spin in national and global news. He&#x2019;s editor of OnlineColumnist.com and author of <a href="books.html">Dodging The Bullet</a> and <a href="books.html">Operation Charisma</a>.</p> </td> <td width="1" height="2576" rowspan="2"></td> <td width="1" height="2"><spacer type="block" width="1" height="2"></td> </tr> <tr height="2574"> <td width="133" height="2574" valign="top" align="left" xpos="0"><img height="172" width="111" src="images/johninframe3.jpg"></td> <td width="1" height="2574"><spacer type="block" width="1" height="2574"></td> </tr> <tr height="1" cntrlrow> <td width="133" height="1"><spacer type="block" width="133" height="1"></td> <td width="7" height="1"><spacer type="block" width="7" height="1"></td> <td width="182" height="1"><spacer type="block" width="182" height="1"></td> <td width="300" height="1"><spacer type="block" width="300" height="1"></td> <td width="1" height="1"><spacer type="block" width="1" height="1"></td> <td width="1" height="1"></td> </tr> </table> <table border="0" cellpadding="0" cellspacing="2" width="597"> <tr> <td><font size="1" face="Arial,Geneva,Helvetica"> <hr noshade size="1"> </font><a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> Homecobolos> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">©1999-2005 <a href="aboutdiscobolos.html"> Discobolos Consulting Services, Inc.</a><br> (310) 204-8300<br> All Rights Reserved. </font></td> </tr> </table> </center> </body> </html>