Europe Must Burn the Bridges and Create the Eurobond. US, UK Must Stop Myopic Opposition to Financial Transaction Tax

There is popular support for further European integration, as the Irish vote shows. Furthermore, that may be the only opportunity for the survival of the common currency in the form we know it today. Nonetheless the ECB must be given the authority, if it does not have it already, to devalue the euro and make the economies of the common currency more competitive.

Above all, they all must act fast. There must be a calculated decisiveness in their actions. Actually I tend to think that the two steps – eurobond and devaluation – must be taken together.

Irish Vote Yes in Fiscal Pact Referendum – SPIEGEL ONLINE.

The main stumbling block toward the eurobond is of course Germany although several other countries bordering the Baltic and North Seas are also opposed to the idea for obvious reasons: The eurobond would make borrowing to them more costly than with the national notes is today. But that is what unity is all about. Germany and the others can more than recoup their loses by keeping the huge common, duty free market to their products. The latter will most likely change very rapidly if the euro disappears in which case we may see intra-Europe commerce plummet.

This is actually the great opportunity for Germany to redress the wrongs of two world wars. Yes, Germany has paid huge reparations in the past but this would be a voluntary act, saving the continent’s economy, perhaps the world economy. It would be a reversal of roles: Germany saving the world economy that we screwed up; the opposite from 1939-45.

The exit of Greece from the eurozone is almost inevitable now, due to the country’s political atmosphere. The question now is whether damage control by the ECB, IMF, will be effective enough in dealing with the separation.

ECB chief calls euro ‘unsustainable,’ slams Spanish bank response – The Washington Post.

ECB President Mario Draghi said on Thursday that he believed the euro zone’s current structure  is unsustainable, and added that the region’s governments must surrender far more budget and regulatory power to a central authority if the currency union is to be saved.

As he spoke, the Irish did their part.

The eurozone crisis is affecting the U.S. tremendously but the greatest contribution we could offer to help, instead of sermonizing, is to cease the opposition to the financial transaction tax (FTT) – intended to diminish wild speculation in the financial markets. We triggered this global crisis and it is it the least we could do. But we do not support the (continental) European proposal because of Wall Street’s influence in Washington. I do believe the republican candidate Romney is also clueless in this regard and will cave in to the same forces. We, with the UK, stand alone on the rock of idiocy.

Regarding the FTT, the UK (that is the conservative government) is just being the little selfish twerp that it has been since taking office. UK’s GDP is much more dependent on The City than their continental neighbors are on their respective financial markets. And PM Cameron’s policies reflect that fact.

Our economic sluggishness today is in part caused by Europe’s crisis and Europe’s crisis is caused, in part, by our political surrender to the influence of money. Everybody will lose unless we have the courage to change.

Egyptian Presidential Election Today, French, Greek Legislative Elections in June – All Critical

The Egyptian candidates, 13 in all, range from islamists to former ministers of the Mubarak regime. The outcome of this election, the first free election in Egyptian history, may have profound consequences in the Middle East. Unfortunately, women have been marginalized in this historic event. Not a single presidential candidate is female. Egyptian women were very active during the revolution which led to the election.

The French will go to the polls to elect a new National Assembly and its composition will be paramount in determining whether President Hollande will be able to carry out his program or instead adopt a more centrist approach.

With the arrival of Hollande, huge differences have surfaced between Germany and France in how to deal with the crisis. Hollande’s call for the creation of the euro-bond has been rejected by Germany, The Netherlands, and Finland.

With the euro bond, the borrowing cost for these 3 nations would increase while others, debt strapped nations, would find borrowing cheaper. The euro bond would homogenize their credit ratings.

All continental members of the EU want to impose a tax on financial transactions which would benefit fiscally in two ways: By generating revenue and by reducing speculation. Only the U.S and Britain oppose the move. But by opposing this tax, and the reduction of speculation, both the U.S. and Britain may be shooting themselves in the foot. If the EU breaks apart, they will feel the pain too. Britain is part of the EU but not of the eurozone.

The Greeks are forming a new government in June and the composition of this government may be the key on whether Greece stays in the euro zone. Further international fiscal support for Greece hinges on whether the new Greek government swallows the bitter pill of austerity reforms. French President Hollande however favors reducing the size of the pill and instituting growth measures simultaneously.

If Greece leaves the euro zone, all bets are off. There is really no precedent in this area so the consequences are difficult to predict. Greece leaving the common currency zone may trigger a contagion effect in both Italy and Spain.

I do not understand why the ECB does not devaluate the euro more to make European-made products more competitive. I believe decisive action in that area should be taken rapidly but it is not happening and the exchange rate is being left to the currency markets where the euro has lost some ground but not enough to really make a difference.

What we all can count on is that all these events will affect us profoundly here in the U.S. The only thing certain is uncertainty.