On Sunday, Ireland became the latest bailout nation in the European Union, accepting an emergency loan of $85 billion Euros ($113 billion) in order to stave off insolvency. These bailouts are an effort to save the European Union, a conglomeration held together by a common currency–and not much else. Can the EU be saved? Probably. Should the EU be saved? That is the essential question.
The European Union was officially created on February 7th, 1992 when the Maastricht Treaty was signed. On Jan. 1, 1999, the euro was introduced as the official accounting currency according to that treaty. At that point, EU countries were required to fix their currency rates to the euro, and prevented from allowing those rates to fluctuate against the euro itself or the currencies of any other Union members. On Jan. 1, 2002, the euro became legal tender, and on July 1, 2002, individual member currencies were officially eliminated. At that point, the European Central Bank began running the monetary policies of the member nations.
Why was the European Union created? A continent which had suffered through world wars was firmly convinced that uniting rivals whose long history of confrontation had led to economic devastation and the deaths of millions would – as former French Prime Minister Robert Schuman said in the Schuman Declaration of 1950 – make war “not merely unthinkable, but materially impossible.” Thus began a long process to realize what Winston Churchill hoped for in 1946, when he envisioned a future “United States of Europe.” ”In this way only will hundreds of millions of toilers be able to regain the simple joys and hopes which make life worth living. The process is simple. All that is needed is the resolve of hundreds of millions of men and women to do right instead of wrong and to gain as their reward blessing instead of cursing,” he said in a 1946 speech in Zurich, Switzerland.
Unfortunately, the “toilers” are currently unimpressed. In Dublin, 100,000 Irishmen took to the streets to protest the austerity measures that will be enacted as a result the latest bailout. In that regard, they join their fellow EU compatriots, the Greeks, who engaged in a series of demonstrations, some violent, after they received a similar bailout with similar strings attached. Thousands of Europeans have also demonstrated in France, England, and Portugal as governments everywhere in Europe grapple with the daunting reality that occurs when other people’s money has run out.
Yet in Ireland, there is an unseemliness to this bailout which legitimizes a substantial portion of Irish wrath. Last May, Irish Senator David Norris spoke to the Seanad (Irish Senate) regarding a “grossly serious matter” relating to a leading European bank. According to an article in Ireland’s Sunday Business Post, Mr. Norris was referring to “liquidity breaches at the Irish operations of a leading European bank. It is believed that the scale of the alleged 2007 breaches was so great that it left the bank several billion euro short for liquidity purposes.” Mr. Norris was allegedly given this information by a whistleblower who worked as “senior risk manager based at one of the European banks in the International Financial Services Centre” who claimed his “repeated 2007 warnings that liquidity had fallen disastrously short of the required levels went virtually unheeded by both the bank and the Financial Regulator.”
The whistleblower noted that “from July 2007 until… mid-September of the same year, several daily liquidity reports showed the bank to be well beneath the 90 per cent ratio” required by banking laws. He was also concerned that “breaches were punishable by a fine or a jail sentence.” As a result, he resigned his position.
The unnamed bank claimed the allegations were false, but it should be noted that the Financial Regulator, aka Irish Financial Services Regulatory Authority, which regulates all financial institutions in Ireland, “took over the entire bank for approximately two weeks.” It should also be noted that no substantial investigation of the allegations has taken place.
The whisteblower himself, or someone claiming to be him, made additional allegations in the comment section of the Wall Street Journal story on the Irish bailout, claiming that the Irish government “has made sure that the calamities that occurred at Irish-domiciled, but foreign-owned, banks will go un-investigated. Examples are Hypo Real Estate (Depfa), Sachsen Landesbank, Cologne Re. Hypo has cost the German taxpayer 142 billion Euro so far.” This writer can attest to the accuracy of the information, but attempts to contact the whistleblower himself have proven unsuccessful.
It is likely that additional bailouts of European Union members (read Portugal and Spain) teetering on the brink of insolvency will put an enormous strain on maintaining a conglomeration held together by little more than a common currency, especially when that currency is being battered by the necessity of large-scale bailouts. It will be further strained by people used to years of socialist profligacy being unprepared for the kind of austerity measures that must now be put in place as a requirement for those bailouts.
Yet one suspects that much of the tension could be defused if those running institutions deemed “too big to fail” were held directly accountable for what might be charitably referred to as a lack of foresight at best–or criminally negligent conduct at worst. Perhaps the appropriate accountability would be two-fold: for the bumblers, a multi-year ban from working in anything related to the banking, investment or securities business. For the criminally negligent, serious jail time and a total forfeiture of one’s assets.
The working ban on the former group is critical. Incompetence that can bring a nation to its knees can no longer be dismissed as an honest mistake with no consequences. Hundreds of millions of people will be paying a price for such incompetence for the foreseeable future, and such colossal mistakes, no matter how honestly they were made, must engender consequences.
Should the EU be saved? That is up to the people of Europe to decide. The idea of making warfare unthinkable is an admirable ambition. Whether that is a viable tradeoff for making individual countries financially vulnerable to their less responsible neighbors and extra-national financial institutions is anyone’s guess. A financial cancer which began in Greece is spreading, and a lot of Europeans are coming to the conclusion that the “cure” might be worse than the “disease.”
They may see “amputation” as the only viable alternative.
Arnold Ahlert is a contributing columnist to the conservative website JewishWorldReview.com