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Paul Krugman in a recent article in the NYT stated that of the problems EU faces today with the budgetary deficit of its member states is because Europe was still not ready for a monetary union or a merger of states like the United States. The truth is that it will never be. The M&A of global corporations or the merger of the states within the US have certain binding laws of one corporation, one nation, one leader, one global policy document, which multi polar Europe can never ever have. There is no point in ever believing that it could happen in Europe, which has all the traditional colonial powers at one table. Let us hence evaluate why EU happened and the only way it could survive.
EU happened because Germany and France wanted to protect and enlarge its markets. At a time when saturation was observed in the export markets for high end German products and US and Japan were weaning away chunks of the Europe’s lucrative markets, the only way to keep expanding business was by integration, and Germany adopted both the East West merger path as well as the EU monetary integration.
The first few years passed smoothly as expected with most of the inherently strong European economies joining the group with the exception of oil rich Norway and deposit rich Switzerland, who had no need to join the race for capturing markets. The problems started later when EU deciding to expand markets started inducting the Euro zone members who were given a conditional invite to join the club, provided they met certain economic conditions. Nobody at that point said that futures transactions would be barred during the accounting process.
From the initial reports filtering in, it seems that , what Greece did was not creative accounting but swapping cash against some future earnings. The airport fees and lottery receipts post merger were pledged to Goldman Sachs, against cash deposited in the books which was perfectly legal and transaction of a real asset not a CDS asset bubble like the US housing crisis.
The practice of pledging oil field returns in lieu of cash or arms has been a age old practice in Africa and the prime reason of tribal clashes and unrest amongst the African nations, Financers of Wall Street through a maze of intermediaries usually conduct those operations discreetly as they often bolster unethical despots and tyrants bringing in their trademark dictatorship, and its disastrous side effects. However in the case of Greece it was not so, and the amount in the books was considered a inward receipt and spend for the welfare of people of a democratic nation. There is no need to create a hue and cry about it, and Greece must be appreciated that it did not repeat the transaction after the merger with EU when the rules and legal positions were redefined.
In the age of innovative accounting and ballooning debts the sins of Greece are not so grave, as the Wall Street Banks and the Dubai debt crisis. However the strong partners in those cases of default used their monetary might to sort out the trouble by unconditional financial support and will get down to sorting out the same through internal action by improving the systemic deficiencies.
The problem of Greece is accounting aberrations to hide bulging deficits, a problem faced by Portugal, Spain, Ireland, Italy and even the UK and the US. Italian Companies are reported to have securitised much bigger transactions repeatedly and sided with Greece during the drafting of the ESA 95 when Eurostat took a firm stand on securitization issues.
However the EU is acting as a strict schoolmaster without promising monetary support or solutions to Greece which is making the nation angry by the day as mounting protests and strikes in Athens make it clear. A matter of concern to the man on the streets is that being a part of EU, Greece has to look at making friends with China and India who are more than willing to invest in Greece with a hope of prying open EU’s closely guarded market place. If that happens Spain and Portugal. UK and many others might follow suit and EU will loose more than it seeks to gain by reprimanding Greece or chastising it publicly. Remember in highly leveraged world of today there is very little difference between a West African dictatorship or the British collonial master as far as lobbying and manipulation against cash.
For more on the subject see our article in Technorati Business
Big Banks Today Control "Commodities to Countries"
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