African Bulletin > Home > August 2012 Edition > COLUMNISTS > <b>Euro’s is in our midst, struggling to survive! Part 2</b><br>By Surujlall Motilall | TAB website
        
        
        
        
        
    

    
        
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Euro’s is in our midst, struggling to survive! Part 2
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COLUMNISTS

Euro’s is in our midst, struggling to survive! Part 2
By Surujlall Motilall

... from last month:

 

The British Conservative government, hostile and particularly so in the last few weeks as parliamentary backbenchers piled on the pressure, to any suggestion of enhanced EU integration, seemed to have thought that it might have the support of other countries on the continent in resisting the emerging solution.

 

However, Prime Minister Cameron seemed to have miscalculated the effect a Franco-German rapprochement would have on other countries whom are not in the Eurozone, for example, Denmark and Sweden.

 

Specialists in this matter will recall a similar isolation of the United Kingdom when the European Community was founded in 1958 that left the country outside of the community until 1973.

 

Mr. Cameron had returned to Britain as a hero of his own parliamentarian supporters, but isolated even from those other countries in the EU as a whole, which were initially lukewarm towards the Franco-German position.

 

But the game is not over for either Britain or the Eurozone states, in the sense that the British government, on the one hand, remains mired in a recession which forecasters said will worsen during the next year, while on the other hand the Eurozone states are still left uncertain as to whether the delinquents among themselves would, in spite of the agreement, be able to keep their side of the bargain in the face of populations fed up with the recessions they are experiencing and skeptical of governments, which have hitherto done more or less of what they liked in the last few years.

 

For a while now, they have developed a new genre in writings, dubbed “writing back to the Empire”.

 

Ex-colonials from the old boondocks like India and Africa turned their gaze onto their old “masters” and with their newfound confidence, used their own experiences to dissect the latter. That dissection is now being conducted from much closer home and from quite an unexpected source that the rating agencies have been the backbone, the sole bane and borne of the old colonies.


A wrong word from one of the plenipotentiaries of these powerful organisations that would have descended into the colonies, were enough to plunge millions into poverty. Borrowing became more expensive or impossible and governmental programmes have to be scrapped. Now it is the turn of the masters that created the agencies to get a taste of their own medicine. And it can be very bitter and sour medicines.


By now most Europeans probably scoffed-off less at the American superstition of “black day, Friday the 13th”, as they were forced to absorb two powerful blows. First, the Greek debt restructuring negotiation that has transfixed and transformed the broken-down of the world financial community. Most bondholders refused to take the voluntary 50 percentage haircut, the euphemism for debt write off, which was agreed last year summer. While the negotiation may be resumed dramatically, the increased of chances that have triggered the chaotic Greek default.


In the latter part of last year, more dramatically, the “Standard and Poverty” regime was one of three credit rating agencies that downgraded nine of the 17 Eurozone economies. As a result, Portugal pulled off their hat-tricks, by endorsed a “junk-rating” from all of their big threes, while France was deprived of its coveted ratings.

 

Yes, France together with Germany, have left with only their rated economy that was backing the Eurozone rescue-funds that have caused the Eurozone-crisis, (the Dutch economy, being the second biggest economy that was left, which is much smaller than the French economy) which became much more difficult to handle.


Since then, the EU leaders have tried to put a positive spin on the news. “In the final analysis, this does not change anything,” French former President Nicolas Sarkozy said. “We must cut our deficits, cut our spending and improve the competitiveness of our economies, by returning to substantial GDP growth.” 

 

Economies like France and Italy have also renewed urgency to resolve a pending European Union fiscal plan as leaders from the European Central Bank, (ECB) as they have expressed their concern that a common budgetary pact is being watered down during negotiations. The common fiscal plan, which the United Kingdom has already opted out of, originally sought to put into place a system of automatic sanctions for countries surpassing deficit limits and is widely perceived as needed to meet certain standards laid out by the ECB. Among its major goals is to provide additional cover to the ECB in buying up government bonds from troubled Eurozone countries that have seen borrowing costs soar in recent months. An ECB purchase of such bonds helps to push down borrowing costs.

 

European leaders had originally sought to have such an agreement in place by the end of March, 2012, but these developments have forced a shortened timetable, with negotiators seeking to sketch out a final agreement by the end of this year. The fiscal agreement would have only applied to member states when they joined the Eurozone, meaning that the Czech Republic, even if they have signed the agreement, needed not to meet budget restrictions immediately. The “Standard and Poor” regime was downgraded again, which has drawn into focus, what many now see as a nefarious role that rating agencies played in European countries, whom have sought to stave off a renewed recession. Rating agencies faced scathing criticism for their roles in the 2008 financial crisis, when many agencies gave positive credit ratings to troubled firms like Lehman Brothers, right up to the day when European  investment banks declared bankruptcy.

 

When these ratings agencies have consigned half of the world to unremitting poverty, there were no squawks. Even when parts of the world, such as the Far East have pulled themselves up, they have shown no mercy when they faltered as it was in 1997. They are now wearing their shoes on the other side of their foot.

 

*Rev. Surujlall Motilall lives in Roosendaal, the Netherlands. His email: S.Motilall@telfort.nl























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