A recent document called “A strong Europe in a world of uncertainties” sketches out a harmonized Superstate that envisions the joining of 27 current EU members. “The euro reflects our commitment to the irreversibility of European integration. However, we must admit that the crisis and its aftermath… make citizens question whether the common currency delivers on its promises and even casts doubt on the sustainability of the project itself.”
An EU Superstate?
Whither the euro so, too, the European Union. That’s why the paragraph after the preceding quote vows to “safeguard the irreversibility of the euro.” The quotes are from a stunning nine-page proposal drawn up by the foreign ministers of Germany and France. “A strong Europe in a world of uncertainties” sketches out a harmonized Superstate that envisions the joining of 27 current EU members. (See Reuters “German, French ministers plan for ‘strong Europe in uncertain world’”) The UK is not included because, even if it opted to stay, some EU leaders are in a vengeful mood. According to Breitbart, Commission President Jean-Claude Juncker is particularly eager “to see the UK…made an example of.” After all, rebellion is spreading, and EU elites prefer the words “our peasants are revolting” to refer to hygiene.
The proposal is not legislation, and it may never be, although the media predicts it will go to the European Commission for approval in the next few weeks. At present, participation in a Super EU seems voluntary but the document is developing and EU politicians are fond of playing hardball behind closed doors, not in newspaper announcements. The strongest language is reserved for saving the euro through changes in monetary and tax policies. After that, presumably, there would be funding for the unprecedented programs in the proposal, which would administered by Germany and France or elite committees with alphabet names.
Anyone who does business or invests in the EU should monitor the situation because politicians are about to make even more of a dog’s breakfast of the currency and business atmosphere. Will this present an opportunity for cryptocurrencies?
A Dramatic But Puzzling ‘Cure’ for Banks and the Euro
“A strong Europe in a world of uncertainties” is a tough proposal to parse because most of the content is as vague and vacuous as its title. There has been little analysis of it in North America and fierce opposition in Europe can blur lines. (See the UK Express “EU SUPERSTATE (step 1): Fury over plans for European-wide ‘tax harmonisation’.”)
The ruling elites undoubtedly expected the sharp backlash, which may explain why the paper was not released before the Brexit vote even though it must have taken some time to draft. Instead, the proposal was leaked to a Polish-state TV station where broadcaster Telewizja Polske predicted apocalyptic consequences. Only after the UK referendum tipped to ‘Leave’ was the proposal officially posted to France Diplomatie – a French government site. So far, EU officials have remained quiet with only a few responding to some media inaccuracies on specific points.
Some goals are clearer than others, however.
What Are The Proposals?
To prevent “the silent creeping erosion of our European project,” the paper calls for three categories of action.
A European Security Compact….”in support of common security and defense policy” for both internal and external threats. Several commitments are specified: containing Iran’s nuclear program; maintaining stability in the Ukraine; protecting Libya’s emerging government; and supporting EU members in the Southern Mediterranean along with parts of Africa. To do so, the paper suggests “standing maritime forces,” “acquiring EU-owned capabilities” in key but unspecified areas, “the harmonization of criminal law” and a “permanent civil-military chain of command.” Talk of an integrated European “civil protection corps” have some members nervous about preserving authority over their own military.
Common European asylum and immigration policy to establish “the world’s first multinational border and coast guard.” The duty to protect people fleeing from war or political oppression is asserted; they are to be treated in accordance with the Geneva Convention; I assume this refers to the Convention relating to the Status of Refugees, which is often inaccurately called the Geneva Convention. “Benefits and burdens” of the migrants are to be shared equally between members.
Fostering growth and completing the Economic and Monetary Union is to proceed on “three fronts simultaneously: strengthening economic convergence, enhancing social justice and democratic accountability” and improving “shock resistance to safeguard the irreversibility of the euro.” How the buzzword goals would be implemented is not clear but it involves harmonizing “regulation and oversight,” and a uniform “corporate tax scheme.” Presumably, the latter would prevent businesses from fleeing an EU nation with ruinously high taxes, like France.
It is difficult to imagine how the “strong Europe” agenda could work in practice. For example, over 20 EU members have signed on to NATO to which they look for assistance with defense. And what would shared security do to the assurance of neutrality that was offered to Ireland in return for joining the EU? Many will balk at increasing the staggering regulations that already control daily life down to how much of a curve can be in bananas for sale. And, then, of course, there was the EU directive to ban bottlers from advertising that water prevents dehydration. The last rule might be funny if a violation did not carry a possible two-year jail sentence.
Unfortunately, the ruling elites have a passion for imposing impractical grand schemes that cause average people to suffer.
And, Then, The Unintended Consequences
The intended consequences of centralizing power would be terrible but the unintended consequences are likely to be worse. Consider just one.
A recent headline at Zero Hedge read, “The $555 Trillion Derivatives Debt Implosion Is About to Begin.” The article explained:
“Now that the BREXIT has happened, the restructurings will begin. Previously, the EU could always threaten the perceived financial Armageddon of leaving the EU to problem countries that wanted debt forgiveness. Not anymore. Britain left the EU and Armageddon didn’t hit. So Spain, Italy and other nations will start threatening to leave if they don’t get debt forgiveness or a restructuring. The derivatives markets smell this. This is why Deutsche Bank (DB) which sits on the largest derivatives book in the world, is on the verge of taking out a 20 year Head and Shoulders pattern.”
And then, on June 30, a strange item appeared on the financial site Wolf Street. Italy had applied to Germany for a post-Brexit bailout of 40 billion euros in order to create a “precautionary liquidity support program for their banks.” Germany curtly refused; it was against the rules! Then Germany abruptly made a deal for Italy to use “government guarantees” for up to 150 billion euros.
Or did they? Wolf Street and Breaking News have doubts. Breaking News commented, “They [the funds] won’t actually be used, and don’t solve banks’ main problem – capital holes. Instead, the aid has a secondary purpose: to show Prime Minister Matteo Renzi can do deals in Brussels.” In short, the announcement could have been pure politics so that Renzi looked like a strong man to Italian voters who would be pacified enough not to push for an Itexit. No one knows what is real and what is elite-theatre for the masses. If it is a sleight-of-hand or an illusion of bookkeeping, then the “government guarantee” introduced more lies and uncertainty into the banking system. It kicked the can of worms an inch farther down the road.
Whither bitcoin? In a free or sane market, money would naturally flow into cryptocurrencies as a hedge, for privacy-protection and in order to avoid bank ‘confiscation’ under other labels. The EU is neither free nor sane and a Super EU is likely to tighten the regulation of digital currencies. The Germans are notoriously cautious and they know Bitcoin threatens their control of currency, taxes and trade. Powerful voices in France are already calling for a ban on cryptocurrencies. Member of Parliament Bernard Monot of the Front National party recently stated,
Virtual and cryptocurrencies are a result of capitalism running on its last legs. Negative interest rates are becoming more common throughout the entire Eurozone. Overthrowing the financial ecosystem is not the right way forward. Cryptocurrencies are an incentive for consumers to empty their bank accounts out of fear for negative interest rates.
Of course, the rapidly ascending Front National is also anti-EU and might block a Superstate but this would not assist the status of Bitcoin. How successful tight regulation or bans would be is a separate question from how much damage could be inflicted on individuals if states try to enforce them. A state cannot eliminate cryptocurrencies but it can make them dangerous and difficult to use. And it can drive all but rebellious, sophisticated or desperate users out of the market.
Do you think an EU superstate is possible? Would it hamper the growth of virtual currencies? Let us know in the comments below!