The European Union and the financial markets have been given not a single moment of respite this week either. The centre of crisis and all fears has now moved from Greece to Italy. The yields on Italian government bonds on Wednesday came close to bursting through the critical 7,5 per cent mark, the highest since the introduction of the euro ten years ago, calling for a new European Central Bank intervention.

On Wednesday, Italy’s situation was seemingly even worse than Greece’s, where outgoing PM Papandreou had officially announced his resignation to make room for a new national union cabinet. The government in Rome lost its support in Parliament and the prospects remain gloomy as austerity measures could dragged on until a possible snap election.  Except if the parliament nevertheless adopts the fiscal package before PM Berlusconi’s resignation, as requested by President Napolitano. No one is eager to imagine what would happen if bond yields stay above 7 per cent, especially knowing that Italy has approximately EUR 64 bln worth f bonds to redeem in the first half of 2012. The Italian debt of EUR 1,900 bln, making up a quarter of the total euro-zone debt, could set in motion a chain of reactions accelerating the decline of the euro-zone.

With European, Asian and American stock markets suffering a dramatic plunge with the surging of Italian bonds’ interest in the background, IMF’s Christine Lagarde warns that, without a concerted global effort in place to come out of crisis,  the world is headed for ‘a lost decade.’ In other words, devastating recession. But what can be done? From Berlin, Chancellor Angela Merkel gave a political answer: amend the Treaty of the European Union. ‘More Europe, not less Europe’, she said. This would be a new step towards a federalisation of the euro-zone through harmonised tax and economic policies, but also a new step in the direction of the foundation of the controversial project called the United States of Europe.

The project was hastily embraced by President Traian Basescu on behalf of Romania, without taking the trouble to explain to the public what a mammoth federal state will mean apart from the obvious surrender of national sovereignty. In fact, the current European crisis has brought back into the limelight the prophets of a federative Europe such as the first EBRD President Jacques Attali.  In a recent interview with France 24, Francois Miterrand’s former adviser was saying hat, at this point, the European Union has three options: bankruptcy, inflation and federalisation.

Bankruptcy because the member states won’t be capable to end the sovereign debt crisis on their own and inflation if ECB starts printing off money to cover the debt.  In his opinion, a full federalisation would very easily solve the sovereign debt crisis for the simple reason that, as a stand-alone legal entity, the EU could issue a minimum of EUR 5,000 bln worth of bonds every year, a fabulous amount no other country in the world could possibly match. His answer would therefore be to extinguish member states’ debt by creating a new debt at a central level…

Meanwhile in Bucharest the central bank governor says the current euro crisis seems very much illogical. At a time when all lunatics have an opinion on how and how much we should borrow in order to pay exiting debt, Mugur Isarescu comes and says the answer to the sovereign debt crisis in Europe has to be economic rather than political. At last a voice of reason in a world that is loosing it completely. ‘It is an economic crime to pump up an economy and then to squeeze it in order to pay a debt. We must present to the society the solution of credit management. This is the solution for Romania,’ says the governor.

The capitalist model of development subsequent to WWII was founded on debt. To create a healthy system of development, based on economic growth principles, will  be difficult to implement because of the huge influence of the banking system living off others’ debt and also because of political reasons. The Romanian Government now prepares a budget with a  deficit intended at 1.9 per cent which means not just a continuation of all these austerity measures, but also very little money left for job-generating investment. On the other hand, the government will need to borrow EUR 13.2 bln until the end of the year for foreign debt repayments.

With an economic growth between 1.8 and 2.3 per cent projected by the IMF, Romania won’t be able to pay the principal and interest and will just have to take new loans next year, in very big amounts which will push the foreign debt up to almost EUR 120 bln. Meanwhile, the government is not taking any active measure to create jobs, relax taxation and secure a healthy growth. Unfortunately, in order to apply the wise solution for coming out of crisis, Isarescu should move from Lipscani (headquarters of the central bank) to Victoria Palace (Cabinet hq)  or perhaps even the Cotroceni's presidential palace, if we are to accept the way in which the Constitution is interpreted today.

Views: 31

Add a Comment

You need to be a member of EJC - Journalism Community to add comments!

Join EJC - Journalism Community

Comment by Hanna McLean on November 14, 2011 at 11:36

Nice post Rodica! Thank you for keeping us posted on the current economic situation in Europe. It is an important topic and I appreciate the fact that you have taken the initiative to write about it. 



Latest Activity

Andrej Matisak posted a status
"Matisak's blog - Is this an ultimate test for the EU?"
14 hours ago
Andrej Matisak posted a status
"Matisak's blog - What's next for Minsk agreement?"
Admir Gremi updated their profile
Langi Stany posted a group

DRCongo Journalists and Media

This Group is focused on all news of Democratique Republic of Congo, In all provinces, news of all sectorsSee More
RANA TABASSUM posted a blog post


THE WORLD ORDER OF TWELVES (12)Rana TabassumEx. Assistant EditorAfter my services with Naqib Lahore (Magazine), practically I only write on my Facebook.Tweet made it essay to share the ideas in few words; so no need to give long logic for the time beingFor the moment even I don’t write on my facebooks, the libraries are already full of reviews1-      I am wondering between the “The Modern World Order” from Modern People of this Modern age & “The Ancient World Order of Twelve”Which type of…See More
SAADIA SEHAR posted blog posts
Dr. Arif Jubaer posted a blog post


#StopBurningMyChild is a peaceful movement against the ongoing terrorist activities in Bangladesh. It is designed by Daily Positive (D+), a non-profit news media from Australia to publish positive news on each country of the world.  D+ wants to engage global citizens in a platform to raise a collective voice against the ongoing political violence in Bangladesh. It started its journey in February 2015 after observing month long political hostility in Bangladesh where children, women and men were…See More
Jerry Nelson posted a blog post

A Defense to Homicide Charges

When James Stapleton was arrested following a shootout in Las Vegas Valley’s northside, he didn’t realize he would add fuel to the conversational fire that is raging in the country about justifiable homicide.Officers arrived in the 5800 block of Westport Circle and discovered two men with gunshot wounds.  Both were taken to UMC Trauma where Stapleton was treated for non-life threatening…See More

© 2015   Created by Arne Grauls.

Badges  |  Report an Issue  |  Terms of Service