While EU Leaders Squabble, The Elephant in the Room Remains Unnoticed

Yves here. Coronavirus is testing all of our formal and informal systems, and too many are being found wanting. One is the EU. Even though EU nations as a whole did a vastly better job of getting on top of coronavirus than the US and UK, despite Italy being an early train wreck, the EU is blowing its performance with the disease via its austerity fixation fatally undermining their responses to the regional and global economic impact. The EU had the chance in the wake of the crisis to implement meaningful reforms but instead resorted to a combination of band-aids and financial gimmickry.

Notice how as Varoufakis points out, this picture is grim on its own terms. His assessment does not include additional deflationary pressures from Brexit and the US, the world consumer of the last resort, having a second Covid-19 downdraft from its weakened position. And let us remind readers that the downside is not just more contraction, more shredding of social safety nets, more hardship for low and middle income households, and more public strife, as bad as all those are. The Italian banking system is at risk of collapse. Were that to happen, it has high odds of being a Creditanstalt-level dislocation.

By Yanis Varoufakis. Originally published at his website

While the media are reporting the news of the deadlocked EU Summit negotiations over the so-called ‘Recovery Fund’, an eerie silence prevails regarding the Elephant in the Room: The huge wave of austerity the Eurozone is sleepwalking towards. Let’s look at the facts.

Even if the Dutch Prime Minister, Mr Rutte, and the rest of the ‘frugal four’, were to remove their objections to the Recovery Fund’s terms and conditions, the net fiscal effect across the Eurozone will be no more than 1% annually for three years. Now, let us turn to the Elephant in the Room: the dreaded return of the obligation to balance government budgets, the infamous Fiscal Compact.

According to the optimistic scenario of the European Commission, the Eurozone’s mean government budget in 2020 will be -8% of total Eurozone GDP . Of this, next year, the nascent steady-state recovery will remove, at best 4%, leaving the Eurozone, on average, with a -4% 2021 budget deficit. Moreover, as this is a mean, some countries (e.g. Italy and Greece) are facing, in 2021, a steady state budget deficit in excess of -8% (down from -15% in 2020). Which means that, to get back to balanced budgets, on average, the Eurozone will impose upon itself fiscal austerity of approximately 4% of its aggregate GDP, with countries like Italy and Greece facing an austerity nightmare in excess of 8% of their crushed GDP.

If this were to be allowed to happen, the Recover Fund’s 1% annual fiscal boost will be countered by a 4% fiscal austerity wave. As Europe begins to recover from the pandemic’s disastrous effects, Brussels will be hitting our economies  over the head with a sledgehammer. And yet, ultimate proof that the EU’s establishment resembles the Bourbons (in that they forget nothing and learn nothing!), our great and good leaders refuse to discuss this ominous Elephant in the Room, choosing instead to invest hours in endless negotiations over the 1% fiscal boost and whether it should be reduced or how it will be managed.

Regarding that, relatively insignificant (in macroeconomic terms), so-called ‘Recovery Fund’, let’s take a quick look at what our leaders are fretting about. Five are the issues at stake. The first three sound important but it is only the last two that constitute truly burning issues.

The three lesser issues are:

  • The overall size of the package (to be financed by debt the EU Commission will take out from private debt markets on behalf of member-states) and the distribution of these monies between grants and loans. While it is true that loans are irrelevant (as member-states and EU companies are facing insolvency, not illiquidity), it is unlikely that this will be a major sticking point.
  • The allocation of the monies between different countries. Here, I fear, the Dutch Prime Minister has a good point: It was silly for the Commission to specify how much money each country would get on backward looking metrics while not taking into account the (yet unknown) effects of the pandemic on the economies, and health systems, of member-states
  • The voting mechanism by which payments will be authorised or blocked: Will Holland have veto power? Will Qualified Majority Voting be used to enable payments? Or to block them? (As we know, the default matters a great deal in decision making, private or collective)

And now to the two, truly, burning issues:

  • Conditionalities: The Dutch (and others hiding behind them, including I dare say… Berlin) want pre-conditions for disbursement – e.g. for the Italian government to legislate, e.g., pension cuts before it collects monies. As this is no less than the politically debilitating troika process that Greece and other countries know well, the demand for conditionalities is a blocking move (especially for Rome) by whomever insists on them.
  • Rebates: One way of pacifying governments that do not want to be seen by their electorates to cave in to mutualisation (e.g. the Dutch PM), or which are not in the Eurozone and cannot see why they should be paying for its ill-design (e.g. Sweden), is to promise them rebates of the monies committed. However, this means that, to preserve the size of the Fund, countries like Germany, France and, yes, Italy, must fork out more.

So, that’s the state of play. Once more, all night negotiations in Brussels, in the midst of a crippling crisis, are focusing on the lesser issues and studiously avoid talking about the Elephant in the Room, that is Europe’s ‘natural’, and self-defeating, proclivity toward austerity for everyone, except for the financiers and the captains of corporations who are treated to the most extravagant of socialisms.

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  1. Sound of the Suburbs

    The Euro was designed in the good old days before the problems of neoliberalism had come home to roost.
    They got the real fanatics in from the University of Chicago.
    “The putative “father of the Euro”, economist Robert Mundell is reported to have explained to one of his university of Chicago students, Greg Palast: “the Euro is the easy way in which Congresses and Parliaments can be stripped of all power over monetary and fiscal policy. Bothersome democracy is removed from the economic system” Michael Hudson “Killing the Host”
    This was one of those all important design criteria for neoliberal fanatics.
    Everything would be controlled by perfect markets.
    Governments and the electorate were the only things they really had to worry about.

    Everyone cheered as periphery economies boomed on borrowed money, e.g. the Irish Celtic Tiger economy.
    No one realised Wall Street was flooding the world with toxic assets.
    “It’s nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world” All the Presidents Bankers, Nomi Prins.
    The periphery nations boomed on money borrowed mainly from the banks at the core.
    The big European banks loaded up on Wall Street’s toxic assets.

    The Titanic was heading straight for the iceberg.
    The neoliberal designers of the Euro-zone had expected perfect markets to ensure none of these things happened.
    Nations didn’t have their own central banks to backstop national financial systems when a financial crisis hit as this wasn’t seen as necessary.
    The Titanic hit the iceberg and there weren’t enough life boats.

    The markets hadn’t batted an eyelid while all this was happening, and they got no signals from the markets that anything was going wrong.
    Market participants are really hot on public debt, though.
    Once Governments had patched up their banks as best they could, and suffered from falling tax receipts after the crisis, Government debt ballooned.
    The markets reacted, and drove bond yields up at the periphery making things worse.
    It looked as though the Euro project was doomed until Mario stepped in to save the day.

    In 2008, the Euro-zone discovered their banks were too big to bail as the usual mechanisms to do this had not been incorporated into the design of the Euro-zone.
    Governments could not get the money from their own central bank to backstop the financial system.
    Neoliberals used to believe in everything being controlled by perfect markets, and so they didn’t need to worry about financial crises as they would never happen.
    Neoliberals hate Government spending, and never realised a day would come when Governments had to spend to bail out the financial system, but it did, and they couldn’t.

    The Euro-zone has never really recovered from 2008; it’s a neoliberal disaster area.

    1. Sound of the Suburbs

      Why don’t you make things worse with austerity?
      This does look like the solution when you use neoclassical economics.

      Policymakers that use neoclassical economics tend to think austerity is the answer, and they did in the 1930s as well.
      Policymakers couldn’t remember what happened when they used austerity in the 1930s, it’s a really bad idea.
      Recommended reading “Austerity, the History of a Dangerous Idea” Mark Blyth.

      Western policymakers don’t understand the mechanics of the monetary system and there was no way they could see the problem with austerity.

      The IMF predicted Greek GDP would have recovered by 2015 with austerity.
      By 2015 Greek GDP was down 27% and still falling.
      The money supply ≈ public debt + private debt
      The “private debt” component was going down with deleveraging from a debt fuelled boom. The Troika then wrecked the Greek economy by cutting the “public debt” component and pushed the economy into debt deflation (a shrinking money supply).
      Greece was pushed into a Great Depression type event by the Troika.

  2. Clive

    I’ve got to the point now where I’m very limited in how much tea and sympathy I’m willing to extend here.

    It was obvious to anyone paying attention that, following the Greek crisis and the only-slightly-less-bad crises in Spain and Italy following the Global Financial Crisis that in signing up to EU membership in general (through the Treaty-enshrined Growth and Stability Pact which legally mandates a strict limit on Member States’ abilities to run deficits) and the euro area specifically, you are hitching your nation’s wagon to an intransigent and unwavering ensemble of “hard money” mentality cultures. The “Frugal Five” call the shots.

    During the Brexit debate I was variously and stridently assured that the EU’s institutions were, if not exactly models of democratic accountability and transparency, then at least they were sufficiently democratic and accountable to be an accurate representation of what the people in the EU Member States wanted by way of policies, taken as a whole (and democracy is a “taken as a whole” system).

    So the decisions of the Council, the Commission and the Heads of Government / Heads of State are, so I am told, in effect “what people voted for”. Okey-dokey. I’ll buy that, since that’s what I’m continually sold on. EU fanbois and fangurls are therefore getting what they want, or what their fellow EU citizens want.

    The only other possibility is that, in voting through those governments, the representatives of the European Parliament and, where applicable, the various treaties which have been entered into, the people voting for them didn’t know what they were getting themselves into. Well, too bad. People should have read the documentation. Everything that is happening now is legal, indeed, much of it is prescribed leaving the Council, the Commission and the Heads of Government / State little room to manoeuvre.

    And if the people in the EU don’t like it, they have a Treaty-guaranteed right to leave the EU. Not that this is a pain-free option, but it is an option.

    Shorter: suck it up, folks, or leave. Yanis, I love you dearly, but quit with the complaining. It is what it is and it always has been. You did your best, but it’s not going to change — at least, not any time soon (if ever).

    1. Ignacio

      This weekend I started a second read (this time it will be a comprehensive study) of Pettis’ The Great Rebalancing where one of the first notes made is that the EU is poised to break up. The underlying reason for this is not austerity but the imbalances within the eurozone in money transfers and commerce. Austerity would just be the (bad) rationale offered to the public that apparently the public buys and votes for as you note. The real elephant in the room is not the fiscal compact but the internal and external imbalances so much loved by these… ‘frugal four’.

      I had some hope that the Coronavirus crisis could be an eye opener but it isn’t. So I regret to say I totally agree with you and accepting EU membership means accepting all this sh#t and this is not going to change. The problem then is that the underlying problem will persist even if the EU breaks up because those ‘frugal four’ don’t know anything else to maintain high employment (votes) but to buy external demand.

      Until it is recognised that these imbalances are the heart of the problem, capital transfers and the internal imbalances (rising inequality = frugality) that create these excess savings moving abroad, things can only worsen. Rutte, and the like, are individuals with a Vision and a Mission. No matter how wrong they are they are in the possession of some ‘truth’ and the votes that gives them the energy to push for their agenda no matter how misguided it is.

      But I anticipate problems for the so called ‘frugal four’. This time they will not find demand abroad to steal, nowhere in the world.

      1. PlutoniumKun

        Sadly I think you are right. I’ve rarely read much informed commentary that does not show some understanding of the root weaknesses within the EU and Eurozone, but nobody seems to know how to get from that understanding to addressing the structural problems. The EU is both not democratic enough and too democratic. The decentralised structure alone with a need for unanimity in decision making is fine for normal times, but leaves it hopelessly incapable of dealing with a crisis requiring unified action.

        I’ve mentioned it before, but I thought that real structural change would only happen when the ‘strong’ countries such as the Netherlands and Austria face a crisis. Unfortunately, I think they haven’t suffered enough, so they can stay in their smug little corners, blocking movement for everyone. The one thing the article hasn’t mentioned is that a lot of unexpected fiscal flexibility has been granted by way of very cheap national borrowing costs (national borrowing limits having gone out the window), meaning the northern European countries have been granted yet another advantage over the south. But despite all the fine words, too many countries are putting their own narrow political needs over a collective need for action. It says something when someone like Orban from Hungary is speaking more sense than the Dutch Prime Minister, but thats where we are now.

        The great problem is that the EU seems to be suffering in a different way the same disease afflicting the US and UK – the belief that because nobody in their lifetime can remember a complete structural collapse, then it cannot happen, that somehow every thing will be ok in the end. Perhaps it is the more recent generation of politicians who have forgotten even the fall of the Soviet Union, let alone WWII, who are being far too complacent.

      2. Marlin

        I wouldn’t be so sure, that no external demand can be found. The USA has a strong fiscal response, and if Biden wins the presidential election, I guess trade war will not be high on the agenda, not even a smarter one than the one run by the Trump administration, as any kind of trade war will look too much like Trump-like.
        If the oil price stays relatively low, I expect as well current account deficits in MENA.
        As well I don’t expect a resurgence of the current account surplus in China. If export demand for Chinese products shrinks, the Chinese gov’t doesn’t want an increase in unemployment. So they will stimulate domestic demand somehow.

        The situation can go on for long, because the frugal countries are in driver seat and the strategy works for them. The pain is felt elsewhere. Austerity is popular in the frugal 4 and in Germany and will continue to be popular as long as unemployment stays low here. Germany has now written a balanced budget in non-crisis times written into the constitution. This was done almost without public discussion, because the cross-party support from left to right was so strong, that there was nobody really to argue for the other side.

        1. Yves Smith Post author

          I suggest you read our Covid-19 post today. The US is not in good shape and things are going to get worse. A lot of that “strong fiscal response” was badly directed and there isn’t appetite for a second round even at the same level to households, where it is most needed, or to state and local governments.

          1. TimH

            Any suggestion on when the Fed will stop propping up the stock market? The fall will not be fun.

        2. PlutoniumKun

          Don’t expect a surge in consumer demand from China. They are pumping cash into the economy, but for various political and structural reasons the fiscal stimulus is almost entirely going into domestic concrete and steel production – i.e. more railways and ghost cities. Consumer stimulus programmes in China are very tentative and will most likely just lead to more saving.

        3. Mikel

          About that external demand: other countries are looking for it in Europe too.
          Everybody is looking for external demand because of their internal class wars.

      3. JoeC100

        Ignacio –

        My NGO (that was doing some energy work in China at the time) received Pettis’s China Financial newsletter. I recall (and probably have this issue on my droves somewhere) Pettis, who was in Europe during the formation of the Euro) stating that the consists pushing this clearly knew it was not going to work and would lead to a major financial crisis – but there view was that such a crisis would force fiscal integration within the EU – some they desired, but recognized was not politically viable without a serious financial crisis..

        Also worth reading Pettis’s new book – “Trade Wars are Class Wars”

        1. Ignacio

          Exactly, and the fiscal integration resulted to be chimeric. Na ga happen!

          It seems to me that such fiscal integration would only be seen feasible when and after the EU turned into de ’24 frugal’, not before. The remaining 20 to join the club should first endure austerity to their bones. Poverty, deaths of despair or whatever needed to join the club.

    2. samhill

      Like all third way approaches it’s easy to come across as a whinny, indecisive milquetoast. Varoufakis sees the stay/leave dichotomy as equally ruinous, saying to the break-it-up crowd, careful what you wish for, we can still intelligently save this thing, it would be a historic crime to not try. I’ve followed him enough to know that he adamantly believes that a break up of the EU in any form, rancorous or congenial (yeh, right) will lead to two zones of drastic inflation and deflation and worse populist fascism than the bureaucratic/financial fascism that runs things now. A break up would be just as devastating for centre and north as the periphery so no one will be spared and with global consequences as in the 1930s.

      I’m in a post industrial town in Italy and pussycat, gentle, liberal friends over 40 will mostly vote Salvini next time, it’s at the point now just like Brexit that they’ll gamble on an unknown and possibly worse future than the guaranteed continuation of the relentless terrible present. Only took 30 years but they are starting to understand the problem isn’t cyclical. The right is doing it’s best to offer up easy explanations of cognitive dissonance, free-loading immigrants and racist Germans, but the left offers absolutely nothing to grab onto, nothing. Even M5S has no clear position on the EU, IMO they should get behind Diem25 and at least have a thoughtful vision to offer those under 30.

      For the moment the Trump-like bluster regarding covid has helped reveal Salvini and his block for the idiot spivs they are but that will be forgotten soon enough as the shut-down bill comes due. Salvini’s block represents local economic elites who’ve been left out of the euro transition, he certainly doesn’t represent working people. If he ever forms a government Salvini will sell out to the EU overlords who will offer a compromise, restructure to strengthen local elites, and transition their bureaucratic/financial rainbow fascism for some pan-European supremacist populist fascism as happened in the 1920s, and Varuofakis’s worst fears will prove true. For me the question is will “the kids be all right” will they work it out thoughtfully and peacefully, that’s who Varoufakis is trying to reach. From what I can see here, rest over 40, rich, poor, right, left, communist, nationalist, internationalists, are inchoate and trying to rebuild the past.

  3. OpenThePodBayDoorsHAL

    My wish is that people would use the correct terms. There is no such thing as a “negative interest rate”. It’s properly referred to as “confiscation of principal”. No, The Fed cannot “print money”. And the Euro is not a currency, it’s a transfer union. That they never initiated a Euro bond market, or re-capped their banks after 2009 is their fault, and those poulets are now coming home to roost, alas. Sauve qui peut

  4. Matthew G. Saroff

    I have been saying that German (and now Dutch) sado-monetarism would destroy the Euro Zone for some time.

    I now believe that it will destroy the EU.

  5. The Rev Kev

    There is such as a thing as tactically winning a fight but only realized later that strategically you lost it. Just ask the Japanese about the Battle of the Coral Sea. It may be that the ‘Frugal Four’ win to have austerity imposed on those countries that borrow money for their economies, even though it is acknowledged that austerity is an idea that does not work but only serves to further cripple an economy. But long term?

    If the EU thought that the UK was at times stroppy and intransigent with their demands, they they should prepare themselves for how those countries will revenge themselves in the years to come. Loyalty works both ways or it doesn’t at all. Italy as an example, which was already in deep trouble, found itself abandoned by the other countries of the EU when it needed help the most a few months back so they may be privately thinking just what they owe the EU. Add these feelings of resentment to an economically imbalanced EU structure and that politically is trying to sideline countries ability to make decisions themselves and that is one bad brew that.

  6. DJG

    I think that it is important to interpret the religious aspects of this crisis: Rutte is engaged in Dutch Calvinism, which consists of making sure that other people suffer and gain an appreciation of The Elect. He sounds like Betsy DeVos in a suit.

    In the U S of A, much of the crisis turns on American Religion[tm], which is a weird combination of Calvinism, altar calls, selective biblical exegisis that consists mainly in telling God what to do, and P.T. Barnum + elephants + entertainment.

    The Frugal Four aren’t engaged in negotiations: They are engaged in proselytization. Somehow, converting the heathen as a political program is not likely to work out well.

    1. DJG

      And I note in the article above:

      pension cuts before it collects monies.

      As Yves Smith pointed out repeatedly in covering the Greek crisis, Greek pensions are quite small compared even to U.S. standards. Italian pensions are not all that generous, either. So cutting pensions is pure cruelty being dealt out for the sake of cruelty.

      Why would Giuseppe Conte, the Movimento 5 Stelle (which is showing, miracle of miracles, a certain politicaly maturity lately), and the Partito Democratico under Zingaretti (not “Blair” Renzi) agree to such terms?

      1. lou strong

        I can’t understand how it rose the idea that Zingaretti is something different from “Blair” Renzi ,as much as the PD ( which is the last reincarnation of the so-called center -left area in the last 28 years ) is or could be something different from the neoliberal hardliners they always showed to be since the beginning.
        Their only belief is the ideology of the ” external bondage”, which means that Italy , to feel good, is supposed to accept any constraint coming from outside, namely Europe, whatever it means.
        Zingaretti had plenty of chances to show some change, but missed every opportunity.
        PD’s political struggle of the moment is the attempt to make M5s swallow the request of the Esm funds, which is another way to have Italy under further external administration for the future, as if the return of the elephant of the article is not enough. .

  7. David

    Is there anything left to say about this?
    I suppose it’s worth reminding ourselves that from the beginning the Euro was a deflationary, austerian project. Its architects were happy to tell anyone who would listen in the 90s that it was intended to show up differences in wages and costs between poorer and richer countries, to enable “convergence” – ie a race to the bottom in wages and conditions. (These were the days when the German economy was the “sick man of Europe”, regularly sneered at on the front cover of the Economist.) In some mysterious way this was supposed to promote growth without inflation. Of course it didn’t work out exactly like that, but the sado-monetarist orientation hasn’t really changed.
    The other thing is that the system of EU governance has been shown to be completely incapable of facing up to crises: it was never designed to do that anyway. You have the paradox of an organisation which is extremely powerful, but has no reliable way of making its mind up what to do. It reminds me of Yugoslavia in the 90s but worse: there, you had a single political party that controlled everything but was paralysed by disagreements between the Republics and the Nations. At least as regards the disintegration bit, I don’t think that’s a frivolous analogy: as in Yugoslavia, in Europe there is no Plan B.

  8. Irrational

    I think it is important to distinguish the Eurozone and the EU, which some commentators do and some do not (at least not explicitly).
    The Eurozone is suffering from the problem that its creators assumed that further fiscal integration would automatically happen – alas it did not.
    In principle the EU (or a subset of countries) could continue as a free trade area (with some additional bells and whistles) even if the Eurozone collapses. In practice, as Yves’ excellent posts on Greece show, a break-up is likely to be painful unless it is well-planned. Good planning being unlikely, I agree that the two are likely to become synonymous.

    1. Clive

      This ignores the problem that the EU as a free trade area is (or would be) still comprised of members for whom government deficits are means by which the so-called level playing field is distorted. Now, you could argue that the deficit terrorist rump could form a mini EU-lite free trade area of fellow bedwetters who have an attack of the vapours at the merest hint of deficit spending. But that would be half a dozen to maybe 10 countries, tops. Hardly worth the bother.

      1. RMO

        Now I’m remembering the astonishment I felt when I found out how the Eurozone was designed (I didn’t pay much attention to this until the GFC hit, a time when I was also taking economics classes as part of accounting training). I had just assumed that the setup under a single currency was similar to Canada or the U.S. with the individual Eurozone nations being analogous to provinces or states – transfer payments from a central bank and authority to even out regional disparities. When I found out how the Eurozone actually worked I was kind of shocked. It seemed as sensible as designing a commercial aircraft with a structural load safety factor of zero or an oceangoing freighter with no deck, no watertight compartments and a freeboard of one centimeter (with the former any attempt at a turn or encounter with turbulence would break the wings, the latter case would mean the tiniest wave would sink the ship). Of course when I read about Robert Mundell and his economic philosophy I was shocked once more. It was designed with the intention to cause pain and misery.

    2. Synoia

      It is interesting that the EU is set up with the need for every country to be in trade surplus, and that the countries in Surplus do not acknowledge the advantage they have for trading in an under valued currency.

      “I’m all right Jack” appears as the prevailing mantra of the Countries in Surplus.

      Canada has a fund between it’s provinces which balances out surplus and deficits. The US has something similar in Federal Spending among the US states.

      The single currency in the EU and its Governance structures appear to have been created in in hell, with a objective of eternal torment.

  9. AbateMagicThinking But Not Money

    Standard Makers and Takers (Suck It Up)

    When joining a club or engaging in any activity social activity, you by default have to accept or reject the rules, written or not. And therein lies the essential problem of the European and US projects.

    Representative democracy militates against unity because if local electorates are against any particular consequence of a law, and their current local power elites concurs, the legitimacy of the unified project is in doubt. Because of this anocracy by default is the order of things.

    That aside examples of fissiparity in the Europena Union project are not encouraging for its continued existence. Merkel’s migrant rush of a few years back and the Schengen visa and Euro zones are notable in that respect.

    The Brexit Case:
    The Brexiteers are deluded in their cake-and-eat-it-ism because if they want to continue engaging in any manner with the European Union they will by default will have to accept external standards. It is a sort of political and commercial “Hotel California”. Essentially the British power-elite will have gone from standard-makers to standard-takers” – just as those who consume Chinese (or declining US) manufactures out of lack of alternative become standard-takers.


  10. RBHoughton

    In the economic world the message is “You cannot rely on anyone” – we should get back to our roots in nationalism. Remember the poems, sings the songs, extol the art. We have been led down a wrong alley infested with crooks. We should get out now. (Fingers crossed this accords with the site rules???)

  11. Geoffrey

    I would just like to add here that the EU is not master of its own destiny. Others suggest that NeoLiberalism is a US ‘hegemonic project’, and the developments of the EU and EZ have to be seen in this light. Steiglitz says so in “The Euro & Its Threat To The Stability Of Europe” (2017). Oskar Lafontaine, German finance minister in run up to launch of Euro, says talk of some sort of capital controls to protect the EZ was vetoed by Clinton admin (quoted in a German documentary called “Whose Crisis” from a few years back). Only recently did I hear Michael Hudson say that in 2008 crisis if EZ banks claimed on their AIG derivative insurance there would be consequences (or word to that effect, AIG did in the end pay out to foreign banks etc), but the point is that – ultimately – when fudging and kicking the can down the road have run their course, the EU has to buckle to US demands. And the EU is well structured for this (from a US point of view) : too big to be cohesive, and divided enough so that one set of players can be instrumentalised to push Brussels around. And the UK has played a consistent role in this: Thatcher pushed for its enlargement for it to become unwieldy, with Brexit UK will be carping from the outside. [It took me along time to come to terms with the EU being a satrap of US but ‘divide and deny’ seems to be US foreign policy writ large: if it can’t get full control, deny anybody else control (incl local populations) by sewing discord and incoherence. The latest, current, phase of NL is of tools of control that were used far away, are now being implemented domestically (and perhaps EU can be seen as ‘domestic’ in North-Atlanticist terms)].

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