Gonzalo Lira Provides Background On Europe's Upcoming Euro Crisis..

Europhrenia  Excerpts:

According to the dictionary, schizophrenia is “a long-term mental disorder of a type involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception, inappropriate actions and feelings, withdrawal from reality and personal relationships into fantasy and delusion, and a sense of mental fragmentation.”

In Europe, they’re having the same thing—only writ large: It’s not that the political/financial leadership of Europe is at odds with the people—it’s that they’re two minds locked in a single body, struggling for control.

In the one hemisphere of this divided brain, the political/financial leadership is convinced the European union is something devoutly to be wished—no matter what the costs, no matter what fortune and the people throw up in opposition.

In the other hemisphere of the europhrenic brain, the people of Europe overwhelmingly do not want integration “at all costs”. In some parts (a lot of parts) of Europe, they don’t want integration at all.
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No country ever voted for monetary union—ever. European monetary integration only ever happened by either government diktat or the legislature overriding the will of the people.
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The people of Europe never wanted total European integration, not even in the best of times—whereas the European leadership adamantly insisted upon it.
And:
The basic problem of the current crisis is, countries of the European periphery—Greece, Ireland, Portugal, Spain, Italy—took on too much cheap debt from banks in the core eurozone countries—France, Germany and Holland—and now are unable to pay for it. It’s not more complicated than that.

(One could argue that the reason the European nations overspent was that the leaders were basically bribing the people with a false sense of affluence, bought and paid for via debt, so that they would acquiesce to the European Union and the eurozone. But that’s for another post.)

And remember:  The real crisis has yet to begin!  The unrest so far is in response to the first wave of official responses towards keeping the Euro solvent and restarting the economy.  The real pain hasn't even started yet.  In Greece, they're protesting, and Portugal just threw out their government.  How long will it be before alienation and anger at the new government's inability to correct begins to rise?

The immediate question:  How quickly (and to what scale) will this crisis bloom? 

Portugal Rejects Budget: Government Collapses, Prime Minister Resigns. Europe Gasps Simultaneously..

Portuguese Premier Resigns After Austerity Is Rejected. 

Portuguese Prime Minister Jose Socrates submitted his resignation Wednesday after parliament rejected his minority Socialist government's latest austerity measures.

The rejection "had taken away from the government all conditions to govern," Socrates said in a televised statement. He said his government would remain in power in a caretaker capacity.

The parliament's rejection of austerity measures—as well as Socrates' resignation—comes just a day before a European summit.

Socrates has said rejection of the austerity plan would force the debt-laden country to follow Greece and Ireland and seek an international bailout, which he opposes.

Brendan Keenan: Kenny will have to pull new plan out of bag as chaos descends  From The Independent.ie..

ENDA Kenny packed his bags for one EU summit in Brussels, but it looks as though he will be attending a very different one.


As the old political saying has it, events have taken over. The plans of EU leaders have been thrown into disarray by even more bad news from Ireland's banks; the imminent collapse of Portugal's government; and stern resistance to bigger bailouts from those flinty Finns.

Mr Kenny's stated purpose at the meeting -- to secure a reduction in the interest rate on the €80bn EU/IMF rescue fund -- now looks irrelevant. Instead, according to reports in Brussels, there may be a special summit as early as next week just to deal with Ireland's difficulties.

The reason seems to be that new estimates for losses at the Irish banks are going to be worse than even the €35bn allowed for in the EU-IMF loan package could cover. These "stress test" figures are not due until next week, but it may be that they will render the original plan unworkable.

EU leaders to delay eurozone rescue deal  From Euractiv.com.  Excerpts:

A government collapse in Portugal and political tensions in other member states means EU leaders are set to postpone until June a decision to reform the euro zone and boost the bloc's bailout facility as they meet for a crucial economic summit in Brussels today and tomorrow (24-25 March).

Today's summit has long been sold as a deadline for leaders to sign off on a swathe of economic reforms including boosting guarantees for its temporary bailout fund, the European Financial Stability Facility (EFSF), which has already been used for Greece and Ireland.

It was also branded as the summit that will finalise a permanent rescue fund after 2013 - the European Stability Mechanism.

But in light of recent political developments in Portugal, Finland and Germany, both of these goals have been put in jeopardy, EU diplomats say.
And:
Adding to the euro zone's woes, Germany put the brakes on a deal for the ESM on Wednesday as it revealed it could not foot payments it had committed to make in 2013. And Finland said it would resist raising the EFSF's ceiling before elections scheduled on 17 April.

"Those providing the guarantees cannot, and those who may soon need a bailout may not be able to request one," an EU diplomat said yesterday, alluding to Finnish resistance to the EFSF and a political meltdown in Portugal preventing it from requesting a bailout.

There will be many more headlines regarding Europe's economy--soon.