Forget Brexit, the EU may be on the brink of collapse

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There is some truth in this ....


The Brexit debate is nothing if not insular. While the business, media and political elite in London obsess over the kind of future relationship the UK should have with Brussels, few seem to have noticed that the EU itself may soon collapse. If and when it does, the fall will be all the more shocking precisely because so many eyes have not been kept on the ball.

The stark truth is that since the financial crisis of 2008 eurozone leaders have tried and failed to put the single currency on a secure footing. President Macron’s attempt to promote a fiscal union is a recognition of this failure and an attempt to do something about it, but his plan has already been killed off by a combination of the German economic policy-making elite and the Italian voter. If it goes ahead at all now, it will be in largely insignificant form.

The attempt to build a banking union is meeting a similar fate. Its bail-in provisions for failing banks are not being consistently implemented and its fund for recapitalising failing banks is far too small. In Italy in particular, the political will does not exist to comply with is strictures. No progress has been made on a European Deposit Insurance Scheme either. And work to build a Capital Markets Union is painfully slow and is, in any case, the work of decades.

The common thread across all these stalled attempts at eurozone reform is a reluctance on the part of national authorities to pursue genuinely European solutions. What this means in practice is that if and when a new crisis comes, there will be no common European response. Individual eurozone countries will be largely left to fend for themselves while EU leaders, as in the last crisis, seek to make decisions largely on the hoof. The question now is for how long eurozone leaders can get away with it? And the answer is not, perhaps, for much longer.

A scan of the horizon suggests it is all too possible to identify the triggers for what could quickly become a eurozone and wider EU collapse. On the economic side one obvious path to crisis is via the onset of a new recession. Eurozone growth is already slowing, and the international environment is clouding badly.

Both a transatlantic trade war provoked by Trump, or a Chinese financial crisis on the back of spiralling public and private debt could cause massive and sudden damage to eurozone economies. A severe recession would in turn undermine the public finances in many already heavily indebted eurozone member states, raise their borrowing costs prohibitively, and wipe billions off the balance sheets of their banks, many of which have been heavy investors in bonds issued by their own governments. Amid falling asset values and a generalised increase in non-performing loans, many banks would be in trouble.

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https://capx.co/forget-brexit-the-eu-may-be-on-the-brink-of-collapse/


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Comments

  • quarkyquarky Frets: 2243
    I think everyone knows that the EU is in a constant race to hold itself together, while keeping ahead of all the stresses trying to tear it apart. Can it keep together long enough to get to the point where it is strong and centralised enough to be secure? Probably, but it isn't a forgone conclusion. Large empires (and international federations) have a habit of falling apart, even where the inhabitants have much more in common than those in the EU. 
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  • FretwiredFretwired Frets: 16299
    quarky said:
    I think everyone knows that the EU is in a constant race to hold itself together, while keeping ahead of all the stresses trying to tear it apart. Can it keep together long enough to get to the point where it is strong and centralised enough to be secure? Probably, but it isn't a forgone conclusion. Large empires (and international federations) have a habit of falling apart, even where the inhabitants have much more in common than those in the EU. 
    I agree, although I think a more likely scenario is it shrinks with a view other members like Greece bailing out.  If those than ran it had a more pragmatic view it would have created a two-tier system. The UK could have dropped to tier two along with Greece, maybe Italy and some of the old Eastern bloc countries. Tier two would be free trade by no say. Tier one would be Eurozone and the strong economies which could have closer fiscal and political integration thus making the EU more secure.
    My pump-action drivel gun is smoking hot today!
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  • HeartfeltdawnHeartfeltdawn Frets: 11052
    quarky said:
    I think everyone knows that the EU is in a constant race to hold itself together, while keeping ahead of all the stresses trying to tear it apart. Can it keep together long enough to get to the point where it is strong and centralised enough to be secure? Probably, but it isn't a forgone conclusion. Large empires (and international federations) have a habit of falling apart, even where the inhabitants have much more in common than those in the EU. 
    Whether it's the EU or the UK, there is a lot of holding together going on. Not many countries exist without massive internal stresses. 
    I make Jeremy Paxman look like Fingermouse. 
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  • HeartfeltdawnHeartfeltdawn Frets: 11052
    Fretwired said:
    I agree, although I think a more likely scenario is it shrinks with a view other members like Greece bailing out.  If those than ran it had a more pragmatic view it would have created a two-tier system. The UK could have dropped to tier two along with Greece, maybe Italy and some of the old Eastern bloc countries. Tier two would be free trade by no say. Tier one would be Eurozone and the strong economies which could have closer fiscal and political integration thus making the EU more secure.
    It has to shrink. Even if we stayed in, change was necessary. A tier system would be a far better way of operating for the reasons mentioned. 
    I make Jeremy Paxman look like Fingermouse. 
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  • ESBlondeESBlonde Frets: 2299
    Plenty of pressures other than pure finance for the Eurozone, even the big members (like France and Germany) blatently ignore the rules for national interests. The Eastern europeans are beginning to wonder what they are getting in the future other than a membership on NATO. Greece, Portugal, Spain and Ireland all have thier own issues the EU isn't attending to. One or two Northern European states are having right wing political pressure to be more nationalistic.

    And then they can squable about the money without the UKs massive net contribution.

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  • rocktronrocktron Frets: 461
    The demise of the EU has been predicted since the Greece financial crisis, but it has managed to survive. 

    I expect the European Central Bank will use Quantitative Easing to print more money, but they cannot continue to do this while pursuing a policy of bringing in new member states from poor Eastern European countries which are net takers. At some stage, their financial system will collapse.

    The Germans are aware of this, hence Merkel meeting with Trump to discuss trade.

    I wonder how the German taxpayers feel about EU spending which the EU seems unable, or do not want  to rein in.

    The EU won't change their budget to suit their income, considering the UK is on the verge of leaving. https://www.express.co.uk/news/world/954151/EU-budget-latest-news-Jean-Claude-Juncker-MFF-brexit-news

    As one example of crazy spending, they want to accept 50,000 new immigrants from African states into EU member countries, many of which are opposed to the idea. They are struggling to help the refugees and asylum seekers who are already there, and yet they want to bring in more people. Sheer lunacy.   
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  • siremoonsiremoon Frets: 548
    Fretwired said:
    quarky said:
    I think everyone knows that the EU is in a constant race to hold itself together, while keeping ahead of all the stresses trying to tear it apart. Can it keep together long enough to get to the point where it is strong and centralised enough to be secure? Probably, but it isn't a forgone conclusion. Large empires (and international federations) have a habit of falling apart, even where the inhabitants have much more in common than those in the EU. 
    I agree, although I think a more likely scenario is it shrinks with a view other members like Greece bailing out.  If those than ran it had a more pragmatic view it would have created a two-tier system. The UK could have dropped to tier two along with Greece, maybe Italy and some of the old Eastern bloc countries. Tier two would be free trade by no say. Tier one would be Eurozone and the strong economies which could have closer fiscal and political integration thus making the EU more secure.
    If those who run the EU had a shred of pragmatism then there wouldn't have been a Brexit vote in the first place.  Brussels doesn't know the meaning of the word.
    “He is like a man with a fork in a world of soup.” - Noel Gallagher
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  • ewalewal Frets: 701
    Not forgetting those external pressures with a keen interest in seeing the EU collapse - Russia and the US (Trump and his cronies anyway).
    The Scrambler-EE Walk soundcloud experience
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  • crunchmancrunchman Frets: 3626
    edited May 4

    It was considerations like this that made me vote Brexit.  Much as I dislike the EU in it's current form, it's what is going to happen down the line that is the big problem.  (I'm sure I said as much in some of the pre-referendum threads as well).  The only way the EU will survive is with much closer integration of the Eurozone members.  If that happens we would have been completely sidelined outside the Euro.  If it doesn't happen, then it is doomed and we are better off getting out sooner rather than later.

    If we were to stay in, we need to be fully in and properly committed to it - which would mean joining the Euro.  Even if I thought that was a good idea, it wouldn't be politically impossible.  Being in, with the alternatives of being sidelined for not being in the Euro, or having it fall apart, is a worse place to be than out.

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  • olafgartenolafgarten Frets: 1359
    I feel that the EU has always been trying to solve issues that aren't important, and then they ignore the bigger things impacting member states. A large factor in the Brexit vote was that people in the UK weren't actually sure what was happening in Brussels, and they didn't feel that they had any control over it.
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  • FreebirdFreebird Frets: 784
    edited June 9
    ewal said:
    Not forgetting those external pressures with a keen interest in seeing the EU collapse - Russia and the US (Trump and his cronies anyway).
    China, India, Japan, N/S Korea, Brazil, etc..
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  • SambostarSambostar Frets: 8375
    And me
    It's the Playbus. We're not in control of ourselves. You're only as dumb as you're trained
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  • HeartfeltdawnHeartfeltdawn Frets: 11052
    Sambostar said:
    And me
    But we've got you under control. We know Trump wasn't the only man featured on that Russian hotel pee tape. 
    I make Jeremy Paxman look like Fingermouse. 
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  • FretwiredFretwired Frets: 16299
    Sambostar said:
    And me
    But we've got you under control. We know Trump wasn't the only man featured on that Russian hotel pee tape. 
    Sambostar is Trump.
    My pump-action drivel gun is smoking hot today!
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  • HeartfeltdawnHeartfeltdawn Frets: 11052
    He's Trump's stand-in hair. 
    I make Jeremy Paxman look like Fingermouse. 
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  • GarthyGarthy Frets: 1695
    The fiscal union and a taxation union that would eventually have come with it could never be sold to the populations of Western Europe. By default every westerner including those on minimum wage would be a higher rate tax payer while almost everyone east of Berlin would be taken out of the tax system completely.

    How could any government say to its voting public that they are going to start the income tax scale at 40% with no personal allowance but current expenses would remain? There is a saying that if you owe the bank £100 and you can't pay it back then you have a problem, if you owe £100m the bank has a problem. To take this to its conclusion if 10 million people owe £120k each, the country itself has a problem.
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