Gold, Communists, and the Consolidation of Power in Europe
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Yesterday the street was buzzing as rumors of an interesting solution to the European crisis resurfaced. The solution I am referring to is the 'European Redemption Pac'. Under the plan, first discussed months ago, southern Europe's debtor states would pledge their gold reserves and national treasure as collateral for a €2.3 trillion stabilization plan and the creation of Eurobonds.
Germany and Chancellor Angela Merkle have been strictly opposed to the idea of creating Eurobonds, which would consolidate peripheral country debt with core European debt, ultimately reducing borrowing cost throughout the region. Many consider Eurobonds increasing necessary as Spanish and Italian yields reach unsustainable levels, and there is a very real risk that both countries will ultimately be shutout of the bond market. If that happens, and if Germany refuses to hand over their credit card, which they are extremely unlikely to do without very harsh terms, the EU would fracture.
As an alternative, the European Redemption Pac would create Eurobonds in exchange for southern countries' gold reserves. Italy's gold reserves, for example, are worth €98 billion, and other countries including Portugal and Spain have ample gold reserves.
But the Germans don't just want gold. Reports say that in exchange for the creation of Eurobonds, the Germans also want to consolidate power in the region. After all, Germany's own credit standing would be at stake and they simply will not risk it without a major power grab.
Assuming reports are correct and that Germany is indeed considering a gold & power for Eurobond swap with other EU countries, a new problem is seen - southern European countries dislike Germany.
In south states, opposition to austerity is also opposition to German itself, as many citizens secretly fear that Germany is once again trying to take over Europe.
The political schism is punctuated by recent elections in Greece, which were won by a former communist with extreme left political views, aka Alexis Tsipras. He is expected to make a strong showing in elections in Greece on Sunday. And while many want to think of Tsipras as a Greek phenomenon, recent election in France tell a much different story.
So the stage is set in Europe. Germany is on one end and Greece on the other, and Spain and Italy being crushed in the center. Ultimately, it might be up to these two countries, Italy and Spain, to decide the fate of Europe. Will they give up power to Germany or splinter like Greece? One thing is certain; the statuesque in Europe is coming to a quick end.
Germany and Chancellor Angela Merkle have been strictly opposed to the idea of creating Eurobonds, which would consolidate peripheral country debt with core European debt, ultimately reducing borrowing cost throughout the region. Many consider Eurobonds increasing necessary as Spanish and Italian yields reach unsustainable levels, and there is a very real risk that both countries will ultimately be shutout of the bond market. If that happens, and if Germany refuses to hand over their credit card, which they are extremely unlikely to do without very harsh terms, the EU would fracture.
As an alternative, the European Redemption Pac would create Eurobonds in exchange for southern countries' gold reserves. Italy's gold reserves, for example, are worth €98 billion, and other countries including Portugal and Spain have ample gold reserves.
But the Germans don't just want gold. Reports say that in exchange for the creation of Eurobonds, the Germans also want to consolidate power in the region. After all, Germany's own credit standing would be at stake and they simply will not risk it without a major power grab.
Assuming reports are correct and that Germany is indeed considering a gold & power for Eurobond swap with other EU countries, a new problem is seen - southern European countries dislike Germany.
In south states, opposition to austerity is also opposition to German itself, as many citizens secretly fear that Germany is once again trying to take over Europe.
The political schism is punctuated by recent elections in Greece, which were won by a former communist with extreme left political views, aka Alexis Tsipras. He is expected to make a strong showing in elections in Greece on Sunday. And while many want to think of Tsipras as a Greek phenomenon, recent election in France tell a much different story.
So the stage is set in Europe. Germany is on one end and Greece on the other, and Spain and Italy being crushed in the center. Ultimately, it might be up to these two countries, Italy and Spain, to decide the fate of Europe. Will they give up power to Germany or splinter like Greece? One thing is certain; the statuesque in Europe is coming to a quick end.
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