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Europe Finally Admits A Monetary Union Leads To "Increased Unemployment And Social Hardship"

Tyler Durden's picture




 

It was back in December 2012 when we summarized the biggest failing with the Eurozone: a continent in which due to the lack of a flexible currency (also known as a gift to Germany and what otherwise would be a very, very expensive Deutsche Mark) the member nations were unable to devalue their way out of depression. Namely, that absent the ability to engage in external devaluation, Europe's troubled nations (i.e., most of them) had only one option: internal devalution, also known as plunging wages.

Here is what we said:

Most European countries (including France) face a desperate need for external devaluation, which is impossible under a monetary union, leaving only internal devaluation as an option. This is where the much maligned concept of austerity comes in:  from a macroeconomic perspective, austerity is not so much an exercise at moderating the pace of debt increase (as neither Spain nor Italy have reduced their rate of debt issuance), but of gradually becoming more price competitive with Germany: a key outcome that will be needed for the Eurozone to have any chance of survival, i.e., lowering sticky unemployment rates from levels that virtually assure social "disturbances" in the months and years ahead.

 


 

And herein lies the rub: because while protests against “austerity” (which as we observed recently has still not been truly implemented in Europe, and certainly not in Portugal or Spain) are a daily event in most PIIGS nations, “you ain’t seen nothing yet.“ The reason: to achieve the unavoidable macroeconomic rebalancing, and to collapse the spread between soaring labor costs in the periphery and those of Germany (see chart below), the bulk of European countries will need to see wages collapse by anywhere between 30% and 50% to compensate for the lack of state-level currency devaluation optionality. And yes, this includes France.

This much is now accepted by all. Our conclusion, however, demanded more: an actual admission from the brutal oligarchs of the artificial monetary union whose only purpose -like everything else in the New Normal - is to facilitate the transfer of wealth from the poor to the rich.

... telling a continent, which in its desperation is hopeful and confident that the worst is behind it (as its lying politicians take every opportunity to note) that the most acute of standard of living collapses is yet to come, is borderline cruel and unusual. So we will just keep our mouths shut and let Europe’s politicians bring this depressing message to their people. We are confident the reaction will be more than dignified.

Well, today the unthinable finally happened when the following stunner was released by László Andor of the European Commission, in a press release discussing the "Employment and Social Developments: Annual Review highlights need to address risks of in-work poverty":

Social dimension of the EMU

 

The still growing macroeconomic, employment and social divergences threaten the core objectives of the EU as set out in the Treaties, namely to benefit all its members by promoting economic convergence and to improve the lives of citizens in the Member States. The latest review shows how the seeds of the current divergence were already sown in the early years of the euro, as unbalanced growth in some Member States, based on accumulating debt fuelled by low interest rates and strong capital inflows, was often associated with disappointing productivity developments and competitiveness issues.

 

In the absence of the currency devaluation option, euro area countries attempting to regain cost competitiveness have to rely on internal devaluation (wage and price containment). This policy, however, has its limitations and downsides not least in terms of increased unemployment and social hardship, and its effectiveness depends on many factors such as the openness of the economy, the strength of external demand, and the presence of policies and investments enhancing non-cost competitiveness.

So there you have it, not from some fringe blog or some radical, foaming in the mouth euroskeptic, but from the bastion of that most artificial construct of modern times itself: a "united Europa."

And now, we hold our breath for the reaction from the general public upon their realization that for the past decade they were openly lied to every single time a politician opened their mouth, and all they have to show for it is record high unemployment and the worst standard of living for most (if not for the top 1% - they have never had it better) in recent European history.

 

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Tue, 01/21/2014 - 16:44 | 4352912 blindman
blindman's picture

and fiat, centrally controlled, "money";
systemic sovereignty of the extension of
debt and transcription, conscription and
other -iptions or options.

Tue, 01/21/2014 - 17:07 | 4353016 NidStyles
NidStyles's picture

Someday we can say the same about the US and get rid of these fed assholes.

Tue, 01/21/2014 - 17:10 | 4353042 blindman
blindman's picture

they lend you your own money and then
charge you interest for subverting your
sovereignty, then we dumb and blind ass
hats thank them.
it is a funny planet of people.

Tue, 01/21/2014 - 17:21 | 4353097 knukles
knukles's picture

"Which can easily be rectalfied through greater fiscal integration, greater rule and law making autonomy of the EU's governing bodies and complete and total enslavement of its peoples"
        -Juan Valdez Dieselbloom

Tue, 01/21/2014 - 17:56 | 4353225 Chief KnocAHoma
Chief KnocAHoma's picture

Bubba - Hey Forrest I got an important question to ask you.

Forrest - What?

Bubba - If the FED is buying $75-billion a month of debt that will ultimately be paid back by the tax payer, why wouldn't they just eliminate the income tax for one year? That would stimulate the economy and provide real needed funds to main street.

Forrest - You stupid black shrimper! The FED doesn't give a fuck about main street. They are propping up the banks and Wall Street.

Bubba - Oh... well in that case how would you like to go in the shrimppin' bidness with me?

Forrest - Ok.

Bubba - I got it all figured out. Some many pounds of shrimp to pay for the boat... some many for gas... we can sleep right on the boat... ain't gotta pay no rent... and hey all the shrimp you can eat!

Forrest - What about Obama care? How many pounds for that? And unless they do forgive our taxes ... how many pounds for Uncle?

Bubba - Fuckit! Let's just go on disability!

 

Wed, 01/22/2014 - 03:46 | 4354718 Debugas
Debugas's picture

because americans would spend the money buying imports from China

Wed, 01/22/2014 - 12:22 | 4355534 Gankfest
Gankfest's picture

We live in a turd sandwich...

Tue, 01/21/2014 - 16:47 | 4352918 LMAOLORI
LMAOLORI's picture

 

 

How long before our leaders admit QE doesn't help Main Street?  (The 12th of NEVER)

Wall Street adviser: Actual unemployment is 37.2%, 'misery index' worst in 40 years
Tue, 01/21/2014 - 16:46 | 4352927 Yen Cross
Yen Cross's picture

 Look at the French Employment chart.  Hollande must have been inverted when he made this statement!

 

Tue, 01/21/2014 - 17:14 | 4353072 wintermute
wintermute's picture

Julie Gayet would know if he was inverted at the time.

 

Tue, 01/21/2014 - 17:19 | 4353085 Yen Cross
Yen Cross's picture

 This  Julie Gayet ?

Tue, 01/21/2014 - 18:05 | 4353270 knukles
knukles's picture

OMG
Just proves looks do not a brain make.
He fucked her for her body.

No wonder his "misses" partner got mad
She can't even "divorce" the ugly little dwarf.

I know there's more than one oxymoron in there.. including him

Tue, 01/21/2014 - 16:46 | 4352928 Joebloinvestor
Joebloinvestor's picture

I thought they would wait till France went belly up.

Tue, 01/21/2014 - 16:47 | 4352933 Greenskeeper_Carl
Greenskeeper_Carl's picture

This monetary union has gotten us deeper into a hole with more debt and more unemployment. So obviously the solution is less sovereign independence and moar central planning. Don't worry guys, they got this shit under control now

Tue, 01/21/2014 - 16:50 | 4352945 Spungo
Spungo's picture

Can you imagine how fucked these countries would be on a gold standard? Their entire economies rely on the ability to print money out of thin air. This is pathetic.

Tue, 01/21/2014 - 17:21 | 4353090 Dick Buttkiss
Dick Buttkiss's picture

If they'd never gone off the gold standard, none of this would have happened.

Anywhere.

Tue, 01/21/2014 - 16:51 | 4352948 NoDebt
NoDebt's picture

"limitations and downsides not least in terms of increased unemployment and social hardship"

And on the other side of the card it says:

"... but it's SO important we have it, that we're willing to accept that, as witnessed by... well... pretty much ALL of our actions to preserve it, regarless the cost."

Tue, 01/21/2014 - 16:53 | 4352967 PontifexMaximus
PontifexMaximus's picture

Bullish. Mario is a reliable chap!

Tue, 01/21/2014 - 16:53 | 4352968 Dr. Engali
Dr. Engali's picture

Well duhhhh.........Paging Nigel Farage.

Tue, 01/21/2014 - 16:56 | 4352985 The Reich
The Reich's picture

O'RLY?

Wed, 01/22/2014 - 05:32 | 4354788 StychoKiller
StychoKiller's picture

Putin can't believe it either! :>D

Tue, 01/21/2014 - 17:04 | 4353006 migra
migra's picture

What do those people over there have to do to end the european union because it obviously is not working. That appears to be the only answer left. 

Tue, 01/21/2014 - 17:06 | 4353013 Occident Mortal
Occident Mortal's picture

The euro is the dumbest idea ever.

What were the benefits supposed to be?

How can you have a single monetary policy that can simultaneously get the best out of 17 separate economies with 17 different tax codes, 17 different sets of laws and 17 different demographic profiles?

Tue, 01/21/2014 - 17:07 | 4353018 Sudden Debt
Sudden Debt's picture

back in the day, you had to carry a bag of different foreign currencies to travel.
getting all the currencies took you a week.

Tue, 01/21/2014 - 17:54 | 4353230 Anglo Hondo
Anglo Hondo's picture

Never.  Back in the day, 60s and 70s, I went to my bank, told them what I wanted, paid them, and collected the foreign currency the next day.

Never a problem (except during currency controls under the Labor govt.)

 

 

Tue, 01/21/2014 - 18:13 | 4353301 FreeMktFisherMN
FreeMktFisherMN's picture

that 'inconvenience' is irrelevant in magnitude compared to the hellish result of integration. And I would add that gold is money and ultimately purchasing power is based on how much gold would back any of these currencies, so gold is the common denominator. 

Tue, 01/21/2014 - 17:27 | 4353121 FreeMktFisherMN
FreeMktFisherMN's picture

It's called the New World Order. They are essentially trying to create a modern day tower of Babel. 

The benefits were always for the elites/masons/skull and bones/bankers/politicians/Zionists.

Tue, 01/21/2014 - 18:27 | 4353351 FreeMktFisherMN
FreeMktFisherMN's picture

All prophecized in Revelation from the Holy Scriptures. God's will will be done. One of the big delusions out there is that America is the 'good guy.' Nothing could be further from the truth. Integral participation in the usurious banking system of inflation and deceit, 1.5 to 2 million unborn children of the Lord murdered every year, increasing #s of people accepting perversions like LGBT both in the legal system as well as in churches, foreign policy that propagates the false theology that Jews are saved even though they do not accept Jesus Christ as their Savior (when the Bible states that NO one comes to the Father but through the Son), foreign policy not of Just war (in defense) but rather of provocation a la Roman Empire, the list goes on. 

Tue, 01/21/2014 - 18:44 | 4353417 LawyerScum
LawyerScum's picture

Human Sacrifice, dogs and cats living together, mass hysteria!

Wed, 01/22/2014 - 05:38 | 4354790 StychoKiller
Wed, 01/22/2014 - 03:47 | 4354719 Debugas
Debugas's picture

from German exporters point of view euro was a very bright and great idea

Tue, 01/21/2014 - 17:07 | 4353014 Sudden Debt
Sudden Debt's picture

Anybody who has children will understand.

1. if you give any of them a gift... be prepared to give them all a gift
2. if you only have one gift, don't give them anything.

otherwise you're the bad guy.

So for devaluation through printing. to who goes the free printed money?

Tue, 01/21/2014 - 19:57 | 4353666 bilejones
bilejones's picture

The Hun

Tue, 01/21/2014 - 17:06 | 4353015 maskone909
maskone909's picture

But certainly a blanket currency that encompasses debtor and creditor nation's could never lead to failure! Preposterous!

Tue, 01/21/2014 - 17:29 | 4353129 BanksterSlayer
BanksterSlayer's picture

Surely Obama can fix everything in EuroLand when he goes to visit them at the Spring Equinox.

"From the Netherlands, the president will travel to Brussels on March 26 for a U.S.-EU Summit with the Presidents of the European Council and the European Commission. This will be President Obama's first visit to the EU institutions. While in Belgium, the president will also hold bilateral events with Belgian Government officials and with the NATO Secretary General."

 

http://www.usatoday.com/story/theoval/2014/01/21/obama-pope-francis-neth...

Wed, 01/22/2014 - 05:44 | 4354793 StychoKiller
StychoKiller's picture

Sign'em up for Obamacare!  (Kill two birds with one fscked-up mess!)

Tue, 01/21/2014 - 17:09 | 4353038 Sudden Debt
Sudden Debt's picture

The europe council is where politicians go to retire.

When they're burnt in their own country, they go work for the european council.
Nobody really votes for them.
nobody knows what they do.... besides spending shitloads of money.

Europe... is the retirement home with benefits.

Wed, 01/22/2014 - 04:16 | 4354731 Ghordius
Ghordius's picture

SD, you are completely wrong and it's shameful that you are still that ignorant about the EU while living and working in the middle of it

you are referring to the European Council. not to be confused with the Council of the European Union or the Council of Europe

the voting members of the European Council are the governments of the EU countries. which, in 26 of 28 cases, are not elected directly, but through majorities in the national parliaments, whose members are elected by you and me and others

Germany is represented by Merkel and her cabinet. don't tell me that nobody voted for Merkel's party (and her coalition member's parties)

France is represented by Hollande and his ministers. don't tell me that nobody voted for Hollande, or the parties of his ministers

the UK is represented by Cameron and his cabinet. don't tell me that nobody voted for Cameron's party (and his coalition member party)

it's a confederative setup. at it's center are the elected national parliaments, who in 26 cases can recall anytime their governments. too bad you don't seem to understand it. but perhaps you don't want to

Tue, 01/21/2014 - 17:13 | 4353065 Bazza McKenzie
Bazza McKenzie's picture

Look on the bright side.  The EU has created a whole new class of very well paid supra-state bureaucrats and politicians.  Surely that has to be a plus.

Tue, 01/21/2014 - 17:21 | 4353093 Save_America1st
Save_America1st's picture

Nigel Farage has been bashing those Marxist douche bags over the head with this for how long now?

Tue, 01/21/2014 - 18:19 | 4353330 no more banksters
no more banksters's picture

There is nothing Marxist in those policies, they are purely Neoliberal.

Tue, 01/21/2014 - 18:25 | 4353358 angel_of_joy
angel_of_joy's picture

Centralization of decisional power is an ESSENTIAL tenet of Marxism.

Do your homework (i.e. read Marx), or shut up...

Tue, 01/21/2014 - 19:07 | 4353476 no more banksters
no more banksters's picture

Giving all the power to banksters is not. Do yours.

Tue, 01/21/2014 - 18:31 | 4353365 angel_of_joy
angel_of_joy's picture

Deleted (double post, sorry...)

Tue, 01/21/2014 - 17:27 | 4353119 Joe A
Joe A's picture

There you have it. What economists and others warned about before the introduction of the Euro and what others have been saying ever since the currency was introduced (because they suffered the consequences) now our overlords in Brussels are finally admitting. So MoFos, report yourselves to the nearest police station to turn yourselves in for deliberately creating a faulty currency and wrecking economies and people's lives. The burocrats from Brussels have used a financial weapon of mass destruction on their own people.

I wonder what Farage will think of this statement and can't wait for another rant of his in the EP.

Tue, 01/21/2014 - 19:33 | 4353576 bh2
bh2's picture

"I wonder what Farage will think of this statement and can't wait for another rant of his in the EP."

Also should be satisfying to watch the dour pusses of Barrosso and other preening bureaucrats who have brought about this disaster and now must own it.

Tue, 01/21/2014 - 17:30 | 4353136 falak pema
falak pema's picture

maybe they will move to a two tier euro. Mutti says yes and Draghi grows a second head. Two headed central bank. 

Imagine the stampede. Which head to you follow and which head do you kick like a football? 

Tue, 01/21/2014 - 17:47 | 4353193 pashley1411
pashley1411's picture

And to think, that silly Hitler thought he needed tanks and dive bombers.   All Germany needed to do was run a (European) flag up a pole, pay other country elites enough to betray their countrymen, and let German industry do what it does best. Genius.

The end game is that southern Europe will look like our recent in-the-news Appalachia; the money and power are elsewhere, just rusty cars and mangy dogs.  

 

Tue, 01/21/2014 - 18:09 | 4353285 Joe A
Joe A's picture

Some say this was already planned by the Germans when they were in the final losing stages of WWII. They just needed to be patient. Germany won WWII in Octobre 1989.

Tue, 01/21/2014 - 17:47 | 4353201 css1971
css1971's picture

Same applies to America BTW.

Tue, 01/21/2014 - 17:47 | 4353202 NoWayJose
NoWayJose's picture

A 'monetary union' does NOT lead to these things -- however, an 'undisciplined monetary union controlled by big banks' does...

Tue, 01/21/2014 - 18:41 | 4353405 angel_of_joy
angel_of_joy's picture

ANY monetary union forces such kind of painful restructuring, since areas with different economic productivities are forced to compete head to head, without the escape offered by currency devaluation.

This is what WILL kill Euro in the end, when all the EU kabuki show will be done with...

Tue, 01/21/2014 - 18:06 | 4353272 gwar5
gwar5's picture

YA THINK??  EU was wrangled on Goldman Sachs lies.

Tue, 01/21/2014 - 18:25 | 4353353 ...out of space
...out of space's picture

united europa si a old political idea, going realy back in history. but before they (1%) always try with force, but now they use a debt. so they got us, where they want us. 

http://www.youtube.com/watch?v=IK8fVHNk0oM

 

Tue, 01/21/2014 - 18:53 | 4353430 americanspirit
americanspirit's picture

Hey - I have an idea. Why doesn't Europe end their Union, and America do the same? Federalism hasn't worked for Europe and it sure as hell hasn't worked for the US.

And let's leave DC burning to the ground while we're at it - finish the job the British started a few hundred years ago. (And those cagey Brits were even smart enough to not join the great Union of Europe - at least where it counts - their money.)

Tue, 01/21/2014 - 20:12 | 4353716 The Duke of New...
The Duke of New York A No.1's picture

The BUNDESBANK says;

Don't worry ... be happy... we will pay for everyone's free lunch.

Tue, 01/21/2014 - 22:04 | 4354100 williambanzai7
williambanzai7's picture

Ahem, better archive that quote. It won't be there shortly.

Tue, 01/21/2014 - 23:59 | 4354377 TNTARG
TNTARG's picture

It's amazing that a  little woman like me could analize and realize this several years ago, and those ultra payed brains at the European Comission had to starve people before admitting it.

/sarc

(Little woman like me born an living in Argentina, a "shithole", as some folks here at Zerohedge told me many times. Not that bad "shithole", I must say).

Wed, 01/22/2014 - 03:39 | 4354708 Debugas
Debugas's picture

when Baltic states had to do inner devaluation under IMF demands (and because their national currencies were pegged to euro and dropping it would completely collapse the trust in local currencies) it went very quickly - your boss tells you that next month your wages will be cut 30% and you have only one chance to "explain" why you do not deserve the cut. 90% of employees agreed to the cut the rest 10% got fired. I can not imagine this happening in France though

Wed, 01/22/2014 - 03:56 | 4354725 Ghordius
Ghordius's picture

meh. as usual, the big misunderstanding about the two european clubs, the EU (28 members) and the eurozone (18 members)

the supporters of the first are starting to moan that their goals are getting into trouble because of the second club

as a supporter of the second club, I can only answer: meh

meanwhile, re "---the bulk of European countries will need to see wages collapse by anywhere between 30% and 50% to compensate for the lack of state-level currency devaluation optionality"

is it so? really?

if yes, is this not a result of globalization, i.e. free unlimited trade?

if yes, how would this look like if we were all using gold-backed currencies? answer: quite the same

we are in the middle of a currency war, and this is just a call for devaluation of the EUR

show me even one case where devaluation did more than just ease a psychological pain. meanwhile ZH is full of "hard money advocates" which advocate only it at home, not abrooad

Wed, 01/22/2014 - 05:08 | 4354777 Debugas
Debugas's picture

devaluation of local currency helps to keep unemployement lower and delays structural changes

it is beneficial in the short run but bad in the long run

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