The European Union's ambassador to the United States, Mr. Joao Vale de Almeida, addressed a large and polite audience today at the University of Iowa's School of Law. In a prepared address he traced the origins of today's EU back to the post-war European Coal and Steel Community, an attempt to prevent another devastating European war by making the French and German economies dependent upon one another for the two key commodities of modern war at that time. The Coal and Steel Community has grown into today's EU of 27 nations. Seventeen of those nations share a common currency, the euro.
Mr. Vale de Almeida is rightfully proud of the EU's major accomplishment of ensuring a peaceful Europe through economic integration. Today's EU guarantees the right to the free flow of goods, services, capital, and people within its borders. This is an achievement that would meet the approval of any Austrian School economist, including this writer. Furthermore, most friends of Europe believe that Mr. Vale de Almeida is right to say that it is this liberal economic policy that is largely to be credited with the belief that another European war is unthinkable. So, what did Mr. Vale de Almeida say that threatens that accomplishment?
Today Europe is in the midst of a very serious economic crisis which threatens the future of the EU itself. What changed to bring about this potentially catastrophic development? Well, Mr. Vale de Almeida told us in unequivocal words--the desire of a European elite for political integration, using the euro crisis as the vehicle.
Mr. Vale de Almeida stated that economic integration had ensured that the errors of one nation could infect all others in the bloc. But this was not possible until 17 of those nations used a common currency, the euro. A nation that uses its own, national currency cannot cause inflation in its trading partners; it can cause inflation only in its own monopolized currency zone. But now all 17 nations can transmit inflation to all other countries in the euro zone via their roundabout ability to monetize their national debts via euro printing. All 27 nations in the EU, even those such as the UK which are not using the euro, are being coerced into bailing out those nations who have used euro printing to accumulate unsustainable sovereign debt. All Europe is at odds over this proposal.
Mr. Vale de Almeida informed his audience that the EU is moving further into political unification, having recently formed the External Action Service, a kind of super foreign ministry that purports to speak for all of Europe. He claims that the EU nations already hold common foreign policy positions on 90% of the issues. No doubt this is true. But it is the other 10% that causes all the trouble, which the recent unrest in North Africa made clear after the Schengen Agreement, that guarantees the free flow of people within Europe, came under attack after Italy allowed free entry to thousands of North African refugees.
But it is the euro that may rip the EU apart. As Dr. Philipp Bagus made crystal clear in his definitive book on the subject The Tragedy of the Euro, the euro was "misconstructed" by allowing the still existing national banks to print euros in a roundabout manner. Thus, there is a great incentive for national governments to run high budget deficits. One may imagine the consequences of having multiple counterfeiters all trying to print money and spend it as fast as possible before other the counterfeiters do the same.
Mr. Vale de Almeida admitted that his colleagues will use the consequences of this fundamental monetary misconstruction to panic the citizens of Europe into ratifying a new constitution that would merge the disparate nations into a fiscal and political union. He claims that such an outcome is the ONLY solution to the crisis, quoting German Chancellor Angela Merkel as saying that "If the euro fails, Europe fails." Really? We American Euro skeptics join our European brothers in categorically denying this absurd assertion. Europe had accomplished all that it needed to accomplish when it formed a large free trade zone that included the free flow of people and capital in addition to that of goods and services. THIS was Europe's great accomplishment, which the Euro elite now threaten to undo. The true "Tragedy of the Euro" is that it will become the mechanism that leads to a "tragedy for Europe", for all that has been accomplished by more astute statesmen over the post war decades is about to be undone by those of lesser intellect and greater lust for power and aggrandizement.