The €urozone: a Continental Ponzi Scheme

It seems to be the commonly held wisdom of economists (sorry, there are two words there which do not belong together) that a measure of a country’s fiscal health may be determined by inspection of the ratio of its public debt to GDP. At, or very near, the point where the first becomes equal to the second there is a consensus that the debt becomes unsustainable and the likelihood of a default emerges. This might look to be an arbitrary combination of factors, but history does seem to back up the theory.

Interestingly, three of the large EU countries are currently in the 90s as a percentile measure of this ratio. The UK is at 90%, France is 96% and Spain is at 99%. Italy is already at nearly 133% and when their impending banking collapse occurs it will be difficult for the Italians not to follow the path already trodden by the Greeks. In the case of the UK the graph of this ratio is now level and (realistically!) expected to turn down into the high 80s in the very near future. For France and Spain the outlook is not so rosy, their graphs have both followed (with minor corrections) a steadfastly upwards trend. Spain’s percentage ratio is increasing faster than that of France and the country is currently without governance, awaiting what will probably be another inconclusive election.

At the time of writing, French unions are stirring up massed resistance to the insistence of the Hollande government (at the behest of the Commission) for perceived massive revision of labour law. The country is virtually ungovernable and when the unionised Gendarmerie have decided they have had enough of being attacked from both directions the spectre of martial law will loom.

It is becoming apparent that this is a ponzi scheme on a continental scale. The main beneficiary is Germany, sucking the profits out of the scheme by inflicting the effects of euro economics on less resilient economies. The only new money entering the scheme is the €80b/month being furiously printed and injected by the ECB. Draghi is now seriously talking about “helicoptering in” new funds proving there is no limit to his personal idiocy. This from the man who headed Italian banking when the roots of their current problems as holders of one third of EU non-performing debts were nurtured. One or more of these economies will collapse in the not too distant future. This will be an extinction level event for the euro, and probably for the EU grand project as well. It will affect the UK badly whether we are still inside or outside of the EU, but to prevent our grandchildren having to pay off the debts of continental profligacy and economic mismanagement we should leave.