Simone Wapler – La Chronique Agora (France) –
As you know, I am skeptical about the survival of the euro. Certainly, there has not been “death in Venice” on the side of the Italian banks but the crisis is not over and the German elections will be decisive.
Some of my American colleagues, like Jim Rickards, believe in the survival of the euro because it is a political currency, and the political will will be stronger than the financial vicissitudes and the plague of the banks.
Apparently, the latest surveys of the Sentix Institute support this thesis.
The Eurozone bursting fear index (blue) fell to 8.6% (from 11.4% last month). This is the lowest level since September 2014.
Since the French elections, investors believe that the political risk has considerably diminished and even Greece or Italy are no longer afraid …
The survey was conducted from 22 to 24 June, just before the recent developments of the Italian banking crisis.
Despite these reassuring curves, I am much less optimistic about the future of the euro, for five reasons.
- Taxpayers are beginning to realize that they are the guarantors of last resort. They, and not, as is often enough, the State or the European Central Bank. Italian taxpayers will pay so that Mario Draghi will not incur losses on his portfolio of Italian bonds that would have been damaged by the bankruptcies.
- The maneuvers of the central bankers, led by Mario Draghi, have produced no palpable results in the real economy: no increase in the standard of living, no reduction in unemployment in the countries that know it.
- These maneuvers of the central bankers have however inflated financial and real estate bubbles, and deprived savers of yield.
- Voters are becoming more and more versatile, as the post-Briton experience of Great Britain shows.
- Voters, savers and taxpayers are beginning to realize that they have been deceived: the euro has been politically imposed from above, by an elite that they have taken as a flu.
The Maastricht agreements which contained the criteria for economic convergence were taken in their backs. The 3% deficit-to-GDP rule is technocratic nonsense.
The adoption of the golden rule by each country should have been the prerequisite to the euro and not the abstruse criteria, slyly distilled into incomprehensible treaties and often rejected.
The golden rule simply states that the public deficit is not possible and that we must tax before spending, redistribute what we have and not what we think we will have, Perhaps in 10 years or 20 years if all goes well.
Unsustainable “austerity” for many, especially France in chronic deficit for 43 years despite its record taxation …
However, once the golden rule has been adopted, fiscal competition could have taken place within the euro zone, with the best-managed countries attracting more investment than the others. The less well managed countries, instead of continuing to massacre their taxpayers, would naturally have reformed. With the golden rule, no one in the Eurozone could have been accused of living on the hook of others.
This historical opportunity has been missed.
To camouflage the mismanagement and insolvency of the bad credit trucks were granted. These debts will never be refunded. Do not forget the only guarantor of last resort: the taxpayer. The pyramid of bad debts exceeds its capacity.
Now look at the red curve of the first graph.
It indicates the perception of investors about a risk of possible contagion of financial risk in the euro zone.
As you can see, this risk is perceived as growing …
The serious things will start in autumn with the stake of the French public finances and the German elections.
How do you make sure your savings do not pay for a new crisis? Everything is here.