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Current Concerns  >  2011  >  No 27, 28 November 2011  >  “The moral of the story …” [printversion]

“The moral of the story …”

by Dr Bruno Bandulet*

How a small country at the Arctic Circle defied the EU and made a short shrift of the banks

Since the Frankfurt Book Fair 2011, we have known that Icelanders like nothing more than story-telling. I also know a story, even a true one. It runs like that: Once upon a time, there was a country in which the banks gambled and made debts as long as they faced ruin (this happened three years ago). Seeing that, the government simply let the banks go bankrupt and nationalized them. This way, the cashless transactions with customers could be maintained (other than within the EU where banks were rescued with tax money).

The governments in London and Den Haag became very angry and demanded that the tax payers of the small country were to come up for the foreign debts of the banks. With the left-winged government of the country, they negotiated the terms of a treaty according to which it was to pay off many billions of bank debts until the year 2024 (translated into the economic power of Germany, even more than one trillion euro).

When Parliament passed the bill, the small country took to the streets for so long until the president refused the signature (whereas in Germany, Horst Köhler did sign and thereafter stepped down from office). A national referendum was carried out where 90 per cent of the people said no. Thereafter the government negotiated a new treaty. Again, the president did not sign it and the people voted no again. Since then, the entire EU has been very angry and does not want to let the small country to join. Hence, it is only the left government that wants to join the EU. The majority of the people wants to stay independent and keep the rich fishing grounds to themselves.

The moral of the story is that they could devalue the crown because Iceland did not belong to the Euro zone. Long since, the trade balance and services are back in the plus range. The economy as well is growing (totally different from Greece). And because Iceland is still not a member of the EU, it retained its independence, its democracy and its dignity. Oh well, a special prosecutor is investigating against the culprits of the financial disaster, even the former prime minister. No one is being investigated in the failed states of the EU.

Lyon: For the first time, German and French economists made a common front against the euro and had consultations about a better economic system for Europe

On 7 October, the old Roman city on the Rhone, Lyon was the venue of a double premiere. For the first time, German and French economists sat together and consulted on the euro and its future. At the end there was far-reaching agreement that the common currency had failed and ought to be replaced by a new European currency system including the return to the national currencies.

From Germany former federal banker Wilhelm Nölling had come who called the currency union “the cause for insolvable problems”. He was “one hundred per cent certain” that the guarantees of billions granted by the Bundestag have to be redeemed. The latest verdict by the Federal Constitutional Court had elevated the enhancement of blackmailing Germany, since Karlsruhe did not draw a clear ceiling for German payments. Nölling predicts the following: a decline of living standards within the EU, the printing of money through the central bank, the escape of capital, illicit work and tax denial.

Like Nölling, one of the Karlsruhe plaintiffs Joachim Starbatty critically dealt with the monetary policy of the European Central Bank. The third German referee (author of this article) approached the subject “Post-euro Europe”.

Jean-Jacques Rosa (Paris) posed the question, why Europe’s ruling elites introduced the euro at all. The answer was, “because their ideas date back to another time, the time of the cold war.” A European centralism could not be enforced, because the external enemy was missing. A reliable prognosis of how long the euro was to survive and what would follow would not be possible, since there were countless possibilities of combination with 17 partners. “The withdrawal of capital from the euro zone is already on the way.” According to Rosa, revolts and revolutions would be threatening the zone if there was no change in the official euro-policy. Gérard Lafay (Paris) pleaded in favor of a new European monetary system with national currencies and for an exchange on a one to one basis to start with (example: one euro equals one new Deutsche Mark). Thereafter, the individual currencies would drift apart until they were fixed on a basis of real exchange rates.

Jean-Pierre Vesperini (Rouen) reminded of the fact that not Germany, but France – namely Mitterrand and the French bankers – had called for and implemented the euro. He estimated the losses in growth which France had suffered because of the euro, to be 0.7 per cent of the yearly gross domestic product. Because of this circumstance alone the French budgetary deficit had increased. According to his colleague, Gabriel Colletis (Toulouse), the euro «was defended by very powerful interests and this is why the house of cards does not collapse that easily».

Professor Rosa added that «trusts are no permanent organizations. The evil within a trust is the one who breaks the trust.» This way he explained the unwillingness of the German Government to make the first move. Roland Hureaux (Toulouse), former member of the prime minister’s cabinet and in cooperation with Michel Robatel (Lyon) organizer of the conference, accused the official euro policy of «lack of knowledge of the cultural factors of the economy». He mentioned the German inflation trauma which was missing in France and supported the common intention to continue the German-French cooperation which began in Lyon, by having its next meeting in Germany. For the German participants it was a surprising that France had been able to mobilize such a phalanx of euro-sceptical professors in Lyon.


It is well and good that now the so-called enraged citizens demonstrated against the banks in Germany, as well. But where are the protests against the euro and against the responsible politicians? There is a simple reason for the European banks’ renewed wobbling only three years after the last crash: According to the June statistics, they are sitting on government bonds from Greece, Ireland, Portugal, Italy, and Spain, their value amounting to 556 billion euro. This is quite exactly what politicians had expected of them. It is a transparent diversionary tactic to blame it all on the banks now. Only one year ago, finance minister Schäuble requested the German monetary institutions not to sell their Mediterranean bonds. Without the banks the euro could not have been founded and it would not have survived for so long. The same is true for the insurance companies which are forced by governments to invest in state bonds, to the disadvantage of the insurance provider.

Jörg Asmussen (SPD) of the finance ministry under Peer Steinbrück laid the foundations for German banks to massively embark in poor US real estate papers which, in order to save the banks cost the tax payer approx. 39 billion euro up to now. He is allowed now to help the ECB rescueing the euro in future.

Before the EU parliament he referred to himself as “pragmatic” and added: “This is something the Germans will still have to learn.” After Axel Weber and Jürgen Stark, there finally is a German at the ECB now who does not bring trouble about. His role within the board of directors of the Mittelstandsinstitut IKB, where he was quite involved when it broke down, ought to have been sufficient to withdraw him from circulation.

Not only FDP members, but also “FAZ“ readers could vote on the permanent euro rescue parachute (ESM). On submission deadline: 91 per cent against, 6 per cent in favor of it.

After the Slovakian parliament rejected the reformed euro rescue package, it was forced to vote again until the result was right. At Soviet times this has been easier. You had to raise your hand only once. Now, the poor Slovaks are held responsible for the by far wealthier Greeks. The renitent president of parliament, Richard Sulík has lost his office. After the new election in 2012, left socialist Robert Fico will most probably gain power again.

Source : Deutschland-Brief, published in

*Bruno Bandulet, publisher, journalist and author was inter alia managing editor of “Die Welt” and member of the editorship of “Quick”. He is editor of the information service “Gold and Money Intelligence (G&M)”. From 1995 to the end of 2008 he was editor of the background service “DeutschlandBrief”, which has been continued as a column in “eigentümlich frei” since the beginning of 2009.

“eigentümlich-frei”, November 2011
(Translation: Current Concerns)