The foreign ministers of France (Jean-Marc Ayrault) and Germany (Frank-Walter Steinmeier) have bilaterally agreed on a series of proposals that radically contradict the model of the European Union that Euro-bureaucrats have been selling us for decades. The million-dollar question is to whom they are proposing this new Europe, and whether this declaration of intent is just that or rather a full-blown announcement of the new path that the hard core of European countries, starting with the Franco-German axis and adding Benelux and Italy (more for its founding history than its current economic state, obviously), will embark on. It is telling how discreetly the foreign ministers of Germany and France, as well as the other European bodies, have handled this proposal, which has only come to light after it was leaked to the Polish media TVP.info. It’s interesting that practically none of the big Western media have reported on this extremely interesting leak of a highly official report, and we can only find comments on the matter in smaller-scale media.
The full 9-page document You can read it here and it’s well worth a read. Both ministers keep reiterating that they are speaking on behalf of Germany and France, and their radically different visions of Europe yield gems such as these: «We will therefore take further steps towards political union in Europe and invite our fellow Europeans to join us in this endeavour» (…) «»We need to recognise that Member States differ in their levels of ambition when it comes to the project of European integration’ (…) «We must find better ways of addressing differing levels of ambition so as to ensure that Europe better meets the expectations of all European citizens» (…) «France and Germany will therefore promote a more coherent and assertive Europe on the world stage”.» Note that it is made clear that the driving forces behind this initiative are France and Germany, and that they no longer always use the term ‘EU’ or «European Union’, but are beginning to revert to the generic term ‘Europe’. “We are seeing the European Union (here, at least, they do use the term ‘EU’…) being severely put to the test. It is facing a series of crises in its southern and eastern neighbourhood.»It is most likely that these southern and eastern regions are the areas being considered for closure." outside the European Superstate.
From there, the leaked document reviews issues on which strategies radically different from the current ones need to be defined. Let’s look at some points that are particularly disruptive and incompatible with the current EU:
A compact European security framework: Germany and France are proposing a Europe as a security bloc. To this end, they want the current EU to begin to take its cue from the European Council and the Foreign Affairs Council, but with a «independent situation assessment capability«. France and Germany will promote an integrated European foreign and security policy, bringing together all the EU instruments currently available for this purpose. They also call for «capabilities»stronger and more flexible mechanisms to prevent and manage security crises in the current EU, as well as permanent military units and chains of command, including naval forces, which should be funded by all the Member States of the new Europe. In other words, moving away from national defence budgets to create a common defence and border control system within the European superstate. The control of external borders will no longer be considered a national task but a shared responsibility, thereby transforming the FRONTEX transforming it into a genuine border police force on a scale commensurate with the new periphery of the Superstate.
Monetary Union: France and Germany have always regarded the task of building a robust Eurozone as their own responsibility, and believe that the time has come to take the debate a step further. They also consider it to be the responsibility of France and Germany to carry this out. And here comes the bombshellto: «The euro area must enter a new phase of economic convergence. To this end, France and Germany will bear the main responsibility for organising a process of economic convergence and political governance which strikes a balance between obligations and solidarity in order to support the process. Countries with surpluses and deficits will have to take action, as a one-sided alignment is politically unfeasible.»In other words, countries with deficits and surpluses cannot continue to be subject to the same monetary policy, and it will be the Franco-German axis that decides whether the Eurozone splits into two or three, and, of course, which zone each current member state will belong to.«The current architecture of the euro is not sufficiently resilient to external shocks or internal imbalances. Leaving the EMU incomplete jeopardises the long-term survival of our single currency«. In other words, the «proposal» is more of a roadmap that hardly anyone will be able to deviate from.”.
The document is full of concessions – political, sovereign and fiscal – but all at once and through the back door; in other words, they are impositions rather than concessions. It seems crystal clear, then, that what has been denied time and again by the European institutions is now being proposed by Germany and France as the only solution to the absurdity of a Europe of bailouts, endless demands and the Troikas. The question is what uncertain future awaits the current member states that will be relegated to Eurozone B. Because that division – as uncertain as it is inevitable – necessarily entails the abandonment of a single monetary policy, and therefore of a single currency. Yes, that very scenario which some of us have been predicting for the past five years («The Eurozone is dead. Long live Europe!«), as the only viable solution to the impasse into which sharing a currency between rich and poor has led us. Of course, a Eurozone A, comprising Germany, France, Italy and the Benelux countries, would converge much more effectively than the current economic Tower of Babel. And a Eurozone B, comprising the remaining peripheral countries – which would gradually be joined by those not yet even in Euro B – might well do so too. Let us remember that, to achieve greater convergence between countries, Germany has already proposed the use of extraordinary measures such as this one o this, and it’s coming soon legislating on the sly in this regard.
The Euroscepticism of former London mayor Boris Johnson and his victory in the Brexit referendum appear to have accelerated the process of creating a European superstate. Paradoxically, however, the possible (and increasingly institutionally endorsed) decision NOT to implement the result could slow down or shelve this Franco-German document in the «use only in an emergency» drawer. But if Brexit goes ahead, the warnings that Johnson published in March, this could lead to the rapid implementation of proposals to create a superstate comprising Europe’s wealthy core, and the consequent break-up of the Eurozone. We will be watching closely to see how this standoff between the Franco-German axis, the Eurocrats and public opinion amongst the affected citizens plays out.
The next question readers should ask themselves in light of this radical shift in the situation is whether their investments and assets are prepared for a break-up of the euro and the resulting massive devaluation of assets in peripheral markets. We have been forecasting the end of the single eurozone for five years now, and selecting financial centres, custodian banks, investment vehicles and assets with the aim not only of averting disaster but also of making the most of it. Let us welcome the European Superstate of the Franco-German axis, because even if we are left on the periphery, our assets will remain safe from a new scenario that will take most people by surprise. What’s more, the European project will make more sense and be more sustainable, because economic reality is very stubborn. As Sir Arthur Conan Doyle said: “Once the impossible has been ruled out, what remains, however improbable it may seem, must be the truth“.“