Brexit: Could it break up the UK?

That is just one of many concerns:

Could the UK hold another Brexit vote?

London (CNN)The UK made a historic decision to leave the European Union on Thursday -- but has so far hesitated on pulling the trigger to go.

Now questions are being asked as to whether it has to happen. Here are the scenarios in the conversation. [...]

The whole article is worth reading, but this may be the most relevant point:

[...] In Scotland -- where 62% of voters cast a ballot to remain in the EU -- Scottish First Minister Nicola Sturgeon has suggested the devolved Scottish Parliament could attempt to veto a Brexit.

She also said Scotland could pursue a second referendum on leaving the United Kingdom in the event of a Brexit. Scots voted by 55.3% to stay in the UK at an earlier referendum in 2014.

Similarly, in Northern Ireland, where 56% of voters want to remain in the EU, Deputy First Minister Martin McGuinness has called for a poll on a united Ireland.

Cameron said Monday that Scotland's Parliament did not have the legal power to veto the referendum result, a position backed by Mark Elliott, professor of public law at the University of Cambridge.

As Elliott explains in a blog post, this is because the UK Parliament in Westminster is sovereign, and has not given away any of its powers to devolved legislatures like those in Scotland or Northern Ireland.

But Jo Murkens, an associate professor of law at the London School of Economics, argues that while Scotland and Northern Ireland may lack the legal power to veto a Brexit, the threat of the breakup of the UK presented a "political and moral" veto.

It is incumbent on Westminster MPs -- who were not just there to "implement the view of the people," but to "exercise political judgment" -- to block the Brexit to prevent the fracturing of the kingdom, he told CNN.

"It's not 52 percent to 48 percent -- it's 2 to 2," said Murkens. "Two nations have voted to remain and two nations have voted to leave. And if the overriding objective is to keep the United Kingdom together and intact, then MPs have a duty to read this referendum result differently and say in order to preserve the UK we will not leave the EU."

Pro-Remain MPs outnumber Leave backers in the House of Commons by about 3 to 1.

Armstrong agreed that the sentiments in Scotland and Northern Ireland could play a major role in how Britain's political class navigates its way out of the crisis.

"Once that politics starts to play out a bit more, and it becomes clear that it's not just a case of the UK withdrawing from the European Union but the UK itself falling apart, that again may crystallize minds in terms of what the future looks like," he said. [...]

Read the whole thing for embedded links and video. It will be... interesting to see how this unfolds. I think that the powers that be will not be in a rush to break up the UK. How they will avoid it, is another question. I expect there will be a lot of negotiating and compromising attempted, but who can say where it will lead to? Time will tell.

     

At Last: the Truth about the Euro Crisis

At last, someone has said it. It ain't pretty, but it's pretty true:

Europe: No solution 'til it gets much worse

[...] By one count, this is the 17th summit dealing with the Euro crisis. Why do they all disappoint on a fundamental level?

The answer is fairly simple: The real solutions will require painful actions that conflict with national myths in key countries and the politicians do not believe the public is yet scared enough to accept that much pain.

Some political problems, like our own debt ceiling debate of last summer, cannot be solved until the very last moment, because the external pressure has to be so high that politicians can gain forgiveness for making painful choices.

It also becomes less attractive to do the wrong thing, because it would be clear that the politicians triggered the ensuing disaster.

The ultimate solution to the crisis will likely require the strong countries to guarantee the debts of the weak countries, a commitment national leaders cannot explain to their voters unless the alternative is the prospect of immediate disaster.

Germany has its lowest unemployment rate in years, making it a bit hard to convince the public that everything is going to pieces. The strong countries also do not trust the weak to make the necessary reforms to avoid having the guarantees from the strong nations turn into real costs when the struggling countries default.

Therefore, the ultimate solution will also require countries in the euro area to give centralized European authorities a veto power over their budgets. Voters in the weak countries are not yet frightened enough to allow their leaders to hand over this much power to Brussels or Frankfurt. [...]

The author believes they can get through it, but only at the height of the crisis, at the last minute. It seems inevitable. And what they are preparing for now.


Also see:

Euro Crisis an excuse for consolidation of power?

EU Member Nations to Sacrifice Sovereignty?
     

Euro Crisis an excuse for consolidation of power?

A Greece euro exit could make Lehman's collapse 'look like a tea party'

London (CNN) -- The wheels are coming off the wagon. The fat lady is about to sing. The proverbial is about to hit the fan. It doesn't matter which saying you use, the facts are inescapable. Greece's membership of the eurozone is untenable under the current conditions and everyone knows it. Some like Hungary's finance minister say openly Greece will leave the euro. The only question is what catalyst will force it out and when. The nearest deadline to hand is the country's June 17th elections, when the Greek voters will decide whether to support parties who will adhere to the bailout agreements or those who want to tear them up.

[...]

Obviously now everyone has Spain in their sights. And there is where the real problem lies. Spain is too big to fully bail out a la Greece and definitely too big too fail. If Spain gets into too much trouble "Project Euro" is likely over. From all my private talks with European officials it has become clear -- Spain is the line in the sand. Greece may be too far gone and be allowed to fall, but Spain will be defended till the bitter end. So I fully expect European leaders to give Spain something to take the boot off the throat of austerity in the coming weeks. Probably the same for Portugal.

European officials have made mistakes in their dealings with Greece. The austerity measures were too harsh. They shouldn't have been nearly so brutal, and that lesson has been learnt. Now with the election of Francois Hollande as France's new president everyone can change course slightly and pretend they meant to do it all along (they didn't). Expect a growth pact to be agreed between Germany and France to sit alongside the main Fiscal Compact, which Germany will not allow to be re-opened.

I could speculate for hours about which solution will be found, what formula they will adopt to keep the whole thing moving -- and frankly, it would be useless. This crisis is now moving too fast and has taken on a life of its own. The firewall is starting to smolder. The austerity plans are starting to fray. The European Central Bank is cutting loose several Greek banks it does not consider solvent. The eurozone is all but back in recession. There are some uncontrollable aspects (the Greek voters for instance) which make forecasting the future direction just about impossible.

I still believe that the single currency will survive in some shape and form. I just cannot see the eurozone surviving in its present form -- not without the most drastic re-organization towards fiscal union, a federation of states with a central bank and treasury. [...]

The crisis they themselves created, becomes the excuse to tighten their grip and consolidate their power.
     

Will Greece, Italy and other PIIGS sink the Euro?

For my fishtank, I got one of those Greco-Roman Ruins backgrounds. I thought perhaps, to make it contemporary, all I needed to do was add a Euro ATM machine:


It would be ironic if Greece and Italy, from which the principles of Western Civilization sprang, turn out to be also the springboard for it's collapse and ruin.

Is it really that bad? I can't say for sure. But it does look alarming, as the Europeans seem unable to contain the problem:

Spain and France: Market says you're next!

NEW YORK (CNNMoney) -- Next up on the 2011 Europe Financial Calamity tour? Spain and France.

Yes, government bond yields in Italy are still climbing -- even after the resignation of Silvio Berlusconi. With the Italian 10-year back above 7%, it's clear that investors are still very nervous about the debt problems in Europe's boot.

But perhaps more alarming is the fact that the market is now increasingly wary of Italy's Mediterranean neighbors as well.

Yields on Spain's 10-year bond have climbed to about 6.3%. That's dangerously close to the 7% level that many investors feel could signal the need for a Spanish bailout.

And France's bonds are starting to look like French toast. With yields now around 3.67%, that puts the "pain" in pain perdu. (Yes, I watch Top Chef.)

[...]

The verdict from the experts I spoke to: Unless the European Central Bank steps up to the plate with a real plan to stop the bleeding, Europe will keep bleeding.

"The market keeps looking ahead to the next potential victim in Europe," said Jurgen Odenius, chief economist for Prudential Fixed Income in Newark, N.J. "Volatility is rising because there is no comprehensive, credible solution. It's becoming readily apparent that there's only one game in town, an ECB rescue."

Europe: New leaders, same debt crisis

Odenius said he doubts that Europe will be able to convince China and other global sovereign wealth funds to put up enough capital to increase the leverage of the European Financial Stability Facility bailout fund. That means the ECB may have to be the proverbial lender of last resort.

If the ECB does not take more bold action -- namely a strong commitment to keep buying more sovereign debt -- Odenius thinks Spanish yields may soon hit 7% like in Italy. And if that happens, France could also be in serious trouble.

"The French have problems in their banking system related to Italy, Spain and other countries. Investors are not suggesting that France is a crisis just yet, but it is murky," he said.

Michelle Gibley, senior market analyst with the Schwab Center for Financial Research in Denver, agreed. European leaders need to bust out a "bazooka" to deal with the debt crisis, she said.

[...]

But the problem facing Europe right now is that leaders haven't even acknowledged they have a big financial weapon, let alone talk about a willingness to use it.

"I am concerned that European policy makers have yet to find the bazooka," Gibley said. "The crisis is rolling from one nation to the next. The contagion has not been contained."

Eurozone teeters on edge of recession

Her biggest worry is that European governments are simply choosing to focus on austerity to deal with their fiscal problems. But while budget cuts, higher taxes and more responsible spending can help cut onerous debt loads, such actions do nothing to help stimulate their economies.

"The debt crisis is now potentially entering a dangerous cycle where austerity just reduces growth, borrowing costs continue to rise and credit ratings get downgraded. That's because nobody is addressing growth," Gibley said. "How much more turmoil does there need to be before the ECB does more?" [...]

But how much more CAN they do? Can they stimulate economic growth, sufficient enough to stay on top of their debt payments? If they don't have a bazooka, will they get one in time?

It all remains to be seen. Hopefully not on a fish tank backdrop.


Also see:

Why Greece is in trouble. And a warning for us.
     

The Itchy & Scratchy Junker & Rompuy Show

Would you buy a used car from these guys? I wouldn't:

Eurogroup president Jean-Claude Junker and
Herman Van Rompuy, head of the European Council

EU officials scramble to solve the crisis

[...] As a work around, officials are reportedly considering a plan to use EFSF funds to provide loans that governments can use to partially insure new issues of domestic debt. But this would effectively add to already unsustainable levels of public debt.

"All of this is stupidity," said Columbia Business School professor David Beim. "All they can think to do is get an ever larger fund and throw it into ever worse assets."

Beim, like many economists, argues that the first step toward stabilizing the eurozone is to restructure the Greek government's debt load. All else merely delays the inevitable and perpetuates the crisis. [...]

If you read the full article, it sounds like it's all about going nowhere quickly. Re-arranging deck chairs on the Titanic. Borrowing from Peter to pay Paul.

It sure doesn't inspire confidence. I wouldn't much care what they do, except that it will have global consequences. And what might those be?
     

Is the EU financial crisis more important than ours because it's possible financial collapse is more imminent?

Or is it?

Why Europe Won’t Implode

The global financial system is currently being roiled by one thing and one thing only: the fate of Europe. This past weekend, high-level meetings of both the International Monetary Fund and the G20 nations took place in Washington, and the predominant focus was on Europe and whether the nations of the European Union and the euro zone would be able to stave off what increasingly appears to be a make-or-break crisis over banks, the sovereign debt of Greece, and the stability of the international financial system.

[...]

Contrary to what many are now predicting, Europe—reeling though it is—will not implode.

The fear is that the European Union as constituted doesn’t have the ability to move quickly enough. It isn’t the size of Greek debt per se, but the fear that the hundreds of billions of dollars potentially exposed will so undermine European banks that the whole system—and that means the entire global banking system—might be imperiled. With so many actions dependent on each of the legislative branches of the 17 euro-zone countries, there is a viable concern that real-world events will move far more rapidly than the political institutions can respond. A Greek default on debts would then trigger various runs on French and German banks, which would then lead to massive selling of any liquid assets anywhere—and stocks above all—which would then cascade around the globe in a fashion not unlike what happened after Lehman Brothers collapsed three years ago this month.

[...]

The widely shared belief is that the United States is either in or on the verge of a recession; that China is slowing precipitously based on weakening exports, imploding urban real-estate bubbles and slack consumer demand; and that Europe is on the verge of an unraveling as historic as the forces that brought it together 20 years ago when the European Union was formed.

So the question is, will Europe implode? Contrary to the widespread assumption, I think not.

It isn’t just that Angela Merkel, Germany’s answer to Margaret Thatcher, has drawn what for her is an unequivocal line that Greece will not leave the European Union or the euro zone. It’s that slowly, sloppily, the governments of Europe are awakening to the realization that since they have tethered their collective economic fate to each other, the costs of unraveling are so immense as to be untenable. No government feels comfortable demanding more funds to bail out Greece or shore up banks or create a backstop for the tenuous finances of Italy. But each government understands at some animalistic level that no electorate will celebrate the consequences of doing too little. Even those supposedly dour, disapproving burghers of Düsseldorf who are tired of bailing out what they see as profligate Greeks would blanch at the market consequences of the end of the euro. Germany doesn’t just pay to maintain that union; it benefits mightily as well.

There is no way to prove that the officials of the EU will access their better angels at the last moment (however auspiciously named the German chancellor is). But this crisis is shaping up as the European version of the American debt-ceiling debate: messy, disheartening, but when pushed to stare at the alternatives, deeply clarifying. [...]

This article makes some good arguments as to why the EU will try to hang in there and make it work; they have invested too much in it. They won't let the EU unravel, because the consequences of that aren't likely any better than what they are facing now.

But the article does not convince me that they can avoid financial implosion. Sure, they are motivated to stop it. Yes, they would not just "let" it happen. But the question is, do they have the power to STOP it from happening?

Clearly, they are going to try. And clearly, whatever happens, the effects will be felt globally, in our Brave New World. Lets hope it's Brave enough.


Also see:

Merkel risks rebellion on euro rescue fund

     

What should the Federal Reserve be doing?

From Judy Shelton's interesting lunch with economist Robert Mundell:

Currency Chaos: Where Do We Go From Here?
'The most important initiative you could take to improve the world economy would be to stabilize the dollar-euro rate.'

[...] Mr. Mundell has a knack for boiling things down to simple terms. He grew up on a four-acre farm in Ontario, went on to earn a Ph.D. from the Massachusetts Institute of Technology, and would ultimately challenge the renowned Milton Friedman at the University of Chicago during the late 1960s. Both economists were strong proponents of free markets, but Mr. Mundell disagreed with Mr. Friedman's advocacy of floating exchange rates.

The sound of a buzzer indicates lunch has arrived. Mr. Mundell suggests that we continue our discussion at the table and politely invites his assistant Ivy Ng, who has been taking careful notes, to join us.

"We've been talking about the possibility of global monetary reform," I continue, deciding to switch gears. "Let's talk a bit about domestic monetary policy. What do you think the Federal Reserve should be doing right now?"

It's a seamless transition for Mr. Mundell. "The Fed is making a big mistake by ignoring movements in the price of the dollar, movements in the price of gold, in favor of inflation-targeting, which is a bad idea. The Fed has always had the wrong view about the dollar exchange rate; they think the exchange rate doesn't matter. They don't say that publicly, but that is their view."

"Well," I counter, not particularly savoring the role of devil's advocate, "I suppose Fed officials would argue that their mandate is to try to achieve stable prices and maximum levels of employment."

Mr. Mundell looks annoyed. "Well, it's stupid. It's just stupid." He tries to walk it back somewhat. "I don't mean Fed officials are stupid; it's just this idea they have that exchange-rate effects will eventually be taken into account through the inflation-targeting approach. In the long run, it's not incorrect—it takes about a year. But why ignore the instant barometer that something is happening? The exchange rate is the immediate reaction to pending inflation. Look what happened a couple weeks ago: The Fed started to say, we've got to print more money, inflate the economy a little bit. The dollar plummeted! You won't get a change in the inflation index for months, but a falling exchange rate—that's the first signal."

Clearly on a roll, I press a bit. "You mentioned gold?"

'The price of gold is an index of inflation expectations," Mr. Mundell says without hesitation. "The rising price of gold shows that people see huge amounts of debt being accumulated and they expect more money to be pumped out." He purses his lips. "They might not necessarily be right; gold could be overvalued right now."

Sensing that the soup is getting cold, I decide to cut to the chase: "What would be your winning formula today? What advice would you give to Washington that would help turn around our moribund economy?"

He pauses to think, but only for a moment. "Pro-growth tax policies, stable exchange rates." [...]

Pro growth tax polices sound good. I don't know about stable (fixed) exchange rates. I would like to hear Milton Friedman's argument against it.
     

Spain: caught between a rock and a hard place

Spain: A Political Risk Analysis

Spain is in the throes of the worst economic crisis in its recent history. Reeling from the collapse of a debt-driven construction boom, Spain entered recession in the second quarter of 2008 and posted six consecutive quarters of negative growth. Although the economy grew by 0.1 percent during the first quarter of 2010, Spain’s growth prospects are poor and any pick-up could be short lived.

Spanish GDP fell 3.6 percent in 2009, and a package of harsh austerity measures announced since then will undermine any economic recovery during the foreseeable future. The International Monetary Fund (IMF) says there will be no positive GDP growth in Spain until 2011, at which point it will still be below 1 percent. The Spanish Finance Ministry on May 20 said it now predicts a 0.3 percent contraction in 2010. It also cut the forecast for Spanish growth in 2011 to 1.3 percent from 1.8 percent.

Meanwhile, Spain now has the highest unemployment rate in the European Union. More than 20 percent of working-age Spaniards (or 4.6 million people) were without a job during the first quarter of 2010. That compares with an average rate of 10 percent among the 16 countries that use the euro currency. Persistently high unemployment presents an obvious threat to political stability in Spain.

As unemployment soars, Spain is also facing an exploding budget deficit. The collapse of the labor market, which has resulted in a steep drop in tax collections, and the Socialist government’s spendthrift policy response of increasing unproductive public sector stimulus spending skyrocketed the deficit to 11.4 percent of GDP in 2009 (or five times higher than in 2008).

The combination of negative GDP growth, rising unemployment, and a high deficit has raised concerns about the sustainability of Spain’s finances. Indeed, two international ratings agencies, Fitch and Standard & Poor’s, have recently lowered Spain’s long-term sovereign credit rating, citing the risk of a prolonged period of below-par economic growth and persistently high fiscal deficits.

The downgrades will make it more expensive for Spain to finance its debt, and increase concerns over Spain’s overall creditworthiness. Indeed, investors anxious that a debt crisis in Greece could create a domino effect in Spain are already demanding higher interest rates to hold Spanish debt.

Although Spain’s problems have been known for years, concerns about the Spanish economy were thrust into the international spotlight in January 2010, when noted New York University Professor Nouriel Roubini said Spain posed a major threat to the stability of the European single currency. Speaking from the World Economic Forum in Davos, Switzerland, Roubini warned: “If Greece goes under, that’s a problem for the eurozone. If Spain goes under, it’s a disaster.”

A debt crisis in Spain would make the problems in Greece look tame by comparison. At €1.3 trillion, the Spanish economy is more than four times the size of Greece’s. (While Greece represents about 2.5 percent of eurozone GDP, Spain accounts for about 11.5 percent.) Spain is also the fourth-largest economy in the 16-nation euro zone, the eighth-largest in the OECD, and the tenth-largest in the world. Many analysts believe Spain is simply too big to be bailed out, and that a Spanish default would almost certainly lead to the breakup of the euro zone.

Fearing for the future of the euro, the European Union and the IMF have put intense pressure on Spanish Prime Minister José Luis Rodríguez Zapatero to implement a series of austerity measures aimed at bringing the public deficit down to a eurozone limit of three percent of GDP. [...]

Read on to see the many reasons why that can't happen. The current government won't survive if they do what they need to, but if they don't do it...
     

Beware of Greeks bearing Red Flags

Greeks protest austerity cuts at May Day rally

Athens, Greece (CNN) -- Greek protesters clashed with police who fired tear gas during the annual May Day rally on Saturday in Athens, where thousands of people gathering for the event seethed over government belt-tightening plans to deal with the country's debt problems.

Waving red flags, the crowd at times surged toward the line of police, who wore helmets and carried riot shields. The police pushed them back each time.

[...]

About 12,000 people were protesting in Athens, and rallies were also taking place in the northern city of Thessaloniki, the spokesman said. Protesters there smashed two ATMs, the glass frontage of a bank, and a car, but no one was arrested or being questioned, the spokesman said.

The annual May Day rally has taken on an angry tone this year as the Greek government prepares to enact austerity measures to cap its large deficit and massive debt.

The package of measures was expected to be revealed Sunday. It is likely to include cuts in civil servants' salaries, pay freezes, reductions in pension payments, changes to tax rates, and increases in the value-added tax consumers pay on purchases, Ilias Iliopoulos, the general secretary of the public sector union ADEDY said Thursday.

The International Monetary Fund and the European Union are discussing a bailout for Greece, whose economic problems threaten the stability of the common European currency, the euro.

The amount of the aid package being negotiated was not clear, but the IMF and EU are likely to demand the austerity measures as a price for a bailout.

Greece's national debt of 300 billion euros ($394 billion) is bigger than the country's economy, and some estimates predict it will reach 120 percent of gross domestic product in 2010. [...]

It seems like everyone is wanting someone else to bail them out, instead of learning to live within their means. We will be looking at similar "austerity measures" here in the USA, if we keep pursuing the course of unsustainable spending and borrowing. Follow the link for more info, photos and video.


Here are some photo's from their other protests over the last few years:



It's no accident that the "flag poles" are so sturdy; they double as weapons:



But the Reds also use petrol bombs too:



I can see why the German's don't want to bail Greece out. Do it for them once, and they would then expect it, again and again, endlessly. The Red Flag folks would demand it.


Also see:

Greece bailout drama: It's only just begun

Let Greece Have Its Default
     

Greece bailout drama: It's only just begun

Apparently, the problem has not been solved, only delayed. Ultimately, it looks like many of the EU countries are looking to one country to bail them all out: Germany.

The Euro Project’s Knockout Flaw

The European Union (EU) has temporarily solved the crisis involving the euro, the EU’s common currency, by bailing out Greece. Temporarily, because no one believes the problems are over.

Greece, teetering on the brink of bankruptcy, is one of the 16 countries which use the common currency. To stop its financial problems from dragging the euro down, the 15 other eurozone countries worked out a €45bn emergency funding plan. They declared that they were prepared, together with the IMF (which is to guarantee a third of the sum), to give Greece a €30bn credit line if interest rates become too high for Athens to borrow the necessary funds on the financial markets. In return, Greece has promised to cut its budget by 10% of its GDP in the next three years. The deal has temporarily restored the markets’ confidence in the euro.

There are at least three reasons for skepticism.

First, it is simply impossible for Greece to cut its budget by 10% of its GDP in three years without having the option of devaluating its currency to make its products cheaper on the international markets. The Economist argues that the €45bn rescue plan has “merely bought time – three years, in effect, to contain the adverse consequences of a possible Greek default.” The magazine states, moreover, that Greece is in need of a rescue plan closer to €75bn.

Second, Greece is not the only eurozone country facing default. The budgetary situation in the other PIGS (Portugal, Italy, Greece, Spain) and Ireland is equally precarious; that in France and Belgium is not much better. How are countries which might soon need help themselves, expected to help Greece? The blind cannot lead the blind. The main reason why France and Belgium agreed to help Greece is because they count on receiving help themselves when in need. Everyone, however, is expecting help from the same country: Germany.

[...]

Third and most important, however, is the basic flaw of the euro project. It is economically flawed because it is politically flawed, and it politically flawed because, as the Dutch professor Jaap Koelewijn pointed out, it is culturally flawed. The euro is doomed to fall because of insuperable cultural differences.

[...]

In the southern countries, governments are characterized by a higher degree of corruption, which is generally accepted and, up to a point, even considered benevolent and beneficial, because it is compensated by the government’s inefficiency and sloppiness in collecting taxes. The southern citizens do not expect much from the state, but the state does not expect much from them either. Southerners do not trust the government, but the political system works and is not even perceived to be oppressive because the state in return adopts a laissez faire attitude: it does not worry about being cheated by the citizens. Outwitting the taxman is generally accepted behavior and may even make a man so popular that he can rise to the political top. This is what happened with Silvio Berlusconi in Italy.

Before the euro was introduced, the states in Southern Europe made up for their losses in taxes by occasionally devaluating the currency as a method of indirect tax collection. The introduction of the euro, however, has made the latter impossible, and has put pressure on the governments in the south to improve their efficiency in collecting taxes. As the latter would make these governments hugely unpopular – by breaking the existing modus vivendi, a workable system which so far had not been perceived to be politically oppressive, they would in fact become oppressive – they preferred to accumulate huge budget deficits. When the euro was introduced, the EU authorities imposed upon the eurozone countries the obligation to keep their budget deficit below 3% of GDP and their government debt below 60% of GDP. To hide their real performance from the EU authorities, the southern governments cheated and fixed the figures in the same way that their own citizens had always been allowed to cheat.

The EU is now forcing the Greek government to clamp down on its citizens in a fashion which is incompatible with the political culture in Greece. If Greece fails to do so, the Germans will be forced to bail them out. The latter, however, is perceived by German taxpayers, who rebel against being forced to pay for the “cheating Greeks,” as unacceptable political oppression by the EU. [...]

So somethings gotta give, somewhere. Where will the breaking point be? North or South?

The article goes on to predict that culture will prevail over monetary policy. Apparently, even George Soros is predicting the collapse of the Euro and the breakup of the European Union.     

Is the EU’s currency, the euro, in trouble?

Apparently the Euro is threatened, because of Spain and Greece:

The EU’s Horrible Honeymoon

[...] At this point Europe is not even halfway its 100-day political “honeymoon” since the Treaty of Lisbon, which transformed the EU into a state in its own right, came into force. So far the honeymoon has been a nightmare. Since the beginning of the year, the EU’s currency, the euro, is on the brink of collapse; Greece has been placed under EU financial supervision to prevent it from going bankrupt. Now U.S. President Barack Obama has announced that he will not attend next May’s EU summit in Madrid. It was to have been Obama’s first visit to post-Lisbon Europe – the consecration of the new political order.

[...]

Although Obama’s snub hurts Europe’s pride, the euro’s monetary problems are far more serious. They not only affect Europe’s finances and economy, but may also tear down the political EU framework. When the European Commission placed Athens under EU supervision last week, Greece was almost bankrupt. Brussels has forced the Greek government to present a plan to drastically reduce its budget deficit from 13% to 3% by the end of 2012. The plan will cost the Greeks blood, sweat and tears. It includes a freeze on civil service wages and the postponement of the retirement age. Brussels has invoked new EU powers under Article 121 of the Lisbon Treaty, which allow it to reshape the structure of Greece’s pensions, healthcare, labor market and private commerce.

“The envisaged correction of the deficit is feasible but subject to risks,” says EU Commission President Barroso – an understatement. The Commission fears a backlash from the Greek unions, who might organize strikes and bring down the Greek government. Trade unions in other countries are nervous, too. They warn that it is unacceptable that the European Commission intervenes in setting national wages.

The EU’s Monetary Affairs Commissioner Joaquin Almunia declared that the Greek targets will be enforced strongly and that, if necessary, even more draconian measures will be taken. “Every time we see or perceive slippages, we will ask for additional measures to correct these slippages. Never before have we established so detailed and tough a system of surveillance,” Almunia said. He has demanded quarterly updates on progress towards reduction targets, as well as a first report on 16 March. “This is the first time,” he said, “we have established such an intense and quasi-permanent system of monitoring.”

Much is at stake. In the coming weeks, the strength of the euro will depend on whether the markets believe that the government in Athens is strong enough to implement the reforms or trust that the other eurozone countries will bail out the Greeks. This year the eurozone governments have already borrowed a record €110bn from the markets, thereby forcing up the cost of borrowing for countries with the weakest public finances, such as Greece, Portugal, Spain, Ireland and Italy.

[...]

Even if the situation in Greece can be stabilized, the EU’s nightmare is far from over. The next eurozone dominos that might fall are Portugal and Spain. Portugal’s deficit reached 9.3% of GDP last year, Spain’s 11.4%. [...]

The article describes how there is a great deal of resistance to the idea of "bailing out" Greece, and that Greece may even be "excluded from the Eurozone" before a bailout were allowed to happen, although such an exclusion would contravene the laws of the EU.

But worse still, is the threat of Spain's financial collapse. It has the fourth largest economy in the EU. If it fails, it will be devastating for the EU.

     

Will the EU force Britain to accept the Euro?

Is an attempt being made to split the Anglo-American Alliance, by collapsing the dollar? Connect the dots. From two separate articles:

France Condemns Czech President Over EU Treaty

PARIS (Reuters) - French President Nicolas Sarkozy criticised Czech President Vaclav Klaus on Thursday for failing to sign the European Union's Lisbon Treaty and said there would be repercussions unless he fell into line quickly.

In an interview with Le Figaro newspaper, Sarkozy also said the fact that Britain had not adopted the euro single currency would make it difficult for former Prime Minister Tony Blair to become president of the 27-nation bloc.

[...]

Some European leaders, including Sarkozy himself, have suggested Blair would be a strong candidate, but a number of smaller countries have come out against the British politician and the French president sounded doubtful about his chances.

"The fact that Great Britain is not in the euro remains a problem," Sarkozy said.

As the US dollar continues to weaken, euro and the yen have surpassed the dollar as the favored currency by central banks:

The demise of the dollar

[...] Ever since the Bretton Woods agreements – the accords after the Second World War which bequeathed the architecture for the modern international financial system – America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.

The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."

Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.

The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.

"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.

Well I really doubt there will be an invasion this time. Europe wanted a weaker America, so they can advance their own plans. It looks like they are getting what they wanted. But how far will it go, and at what cost to us? Hastening the collapse of the dollar, to force Britain to accept the Euro as their currency?

Note I said "hastening", not causing. The causes for the weakening dollar have more to do with the actions of our own government, than anyone else. How long before it's too late to turn that around? Or is it already too late?