Humble Pie on the Menu
As we go to press this morning it does not look good in Europe–depending on your point of view. There are those who have held the view for a long time that the concept of a federal Europe which subordinates national sovereignty is doomed to fail. For these, what is now happening in Europe is an “I told you so” moment.
Europe is between Scylla and Charbydis–and the passage is narrowing by the hour.
If you think for a moment that if Europe were a federal republic, with member nations equivalent to states in the United States what is being talked about is equivalent to the US Federal Government accepting a default on California’s debt–and forcing all lenders to take the loss–while ultimately assuming guarantor status for California going forward. Such a move would risk so weakening the United States that it would rapidly go into perpetual decline.
Those advocating for a stronger federal Europe have the view that this current crisis ought not to be wasted. They see it as an opportunity to exert and force European sovereignty and neuter national sovereignty in the region. Both Germany and France favour this. The big problem is that both Germany and France want to be the hegemon in a newly federated European Republic.
We believe the cost of “bailing out” the profligate states of southern Europe will ultimately bring down the European Federal dream. The private sector is being “asked” to take a huge loss on Greek debt voluntarily. It has to be voluntary, else it will trigger credit default swaps. But the likelihood of a shareholder agreeing to such a voluntary destruction of their capital is unlikely. (If the credit default swaps are called in, it will simply move the crisis to those institutions holding the swaps. They would have to front up with the money.) After all, one purchases credit default swaps for just such a risk as this.
Secondly, Greece will set the pattern. If default is forced upon private lenders to Greece, Italy will demand the same. The circle becomes very rapidly a vicious one.
Private lenders will stop lending. Credit will dry up. Interest rates will skyrocket. Who would be willing to lend money to anyone when governments have shown themselves willing to tear up private contracts at a whim?
These paralyzing conundrums are typical of a society which has lost its traditional Christian roots and has decided to wing it, attempting to create its own paradise based on the wisdom and strength of Man. Suddenly Man’s arm is looking very, very puny.
Do homage to the Son, lest He become angry, and you perish in the way. For His wrath may come in an instant. How blessed are all who take refuge in Him.
Psalm 2: 12
Is this the moment of the sudden fierce wrath of the King to fall upon an arrogant, rebellious Europe? We do not know. But at this moment, no-one ought to gainsay the very real possibility.