Category Archives: Sovereign debt crisis

Ireland officially gets its bailout, market gods are displeased.

Ireland finally got its bailout on Sunday and the market is less than impressed. In fact, one could say it is outright disappointed. Marketwatch reports:

The cost of insuring Spanish and Portuguese government debt rose Monday as spreads on peripheral euro-zone sovereign credit default swaps, or CDS, widened to record levels in the wake of a lackluster Italian bond auction, analysts said. The five-year Spanish CDS spread widened by 25 basis points to 350 basis points, according to data provider Markit. That means it would now cost $350,000 a year to insure $10 million of Spanish debt against default, up from $325,000 on Friday. The Portuguese spread widened to 545 basis points from 502, Markit said, while the Italian spread widened to 231 basis points from 215. “Spain and Portugal are now at record wides, suggesting that contagion fears haven’t been assuaged by Ireland’s bailout,” said Gavan Nolan, vice president for credit research at Markit.

When Greece got its bailout, spreads narrowed and the market was happy. But then credit in Europe headed down and spreads hit new highs. Traders are acting smarter this time. If the bailout didn’t work for Greece, they are not going to assume that it will work for Ireland… or Portugal… or Spain.

And the sovereign debt crisis continues.

Ireland was no bastion of capitalism. Here’s what went wrong!

With Ireland sinking under a huge pile of debt, the socialist liberal left points out that Ireland, with its low taxes and supposedly unregulated banking system, is suffering from the excesses of capitalism. Liberals never waste an opportunity to convince you with pleasant-sounding lies.

I’ll give you a couple of examples of where the Irish and European governments, not capitalism, went wrong.

Minimum Wage

AP reports:

Ireland’s 140-page National Recovery Plan proposes to introduce property and water taxes, raise the sales tax from its current rate of 21 percent to 22 percent in 2013 and to 23 percent in 2014, and cut the minimum wage by euro1 to euro7.65 ($10.20).

So Ireland’s minimum wage was 8.65 Euros or $11.46. The minimum wage in the United States is just $7.25 with some states and cities imposing higher rates (the state of Washington has a $8.55 minimum wage, San Francisco is $9.79, and Santa Fe is $9.85) all of which are much lower than Ireland old $11.46 rate and its new $10.20 rate. With Purchasing Power nearly the same in Ireland as in the United States, the minimum wage there was 58 percent higher than in the US.

While everybody talks about Ireland’s extremely low corporate tax rate, much of that benefit was offset by this too high minimum wage. And the minimum wage did not just affect those at the low end of the wage scale. A minimum wage raises costs throughout the economy forcing employees to demand higher wages even at the higher end of the wage scale.

Liberals may argue that capitalism doomed Ireland to failure, but these high minimum wages are most certainly anti-capitalist.

Low interest rates

For years, the Irish economy was hot, earning the nickname Celtic Tiger. Wikipedia explains:

From 1995 to 2000 GNP rate growth ranged between 6 and 11% through 2001 and early 2002 to 2%. The rate then rose back to an average of about 5%. During that period the Irish GDP rose dramatically to equal then eventually surpass that of all but one state in Western Europe.

This economic growth led to speculative excess which led to inflation:

Inflation brushed 5% per annum towards the end of the ‘Tiger’ period, pushing Irish prices up to those of Nordic Europe, even though wage rates are roughly the same as in the UK.

Also:

Rising wages, inflation and excessive public spending led to a loss of competitiveness in the Irish economy. Irish wages are now substantially above the EU average, particularly in the Dublin region. These pressures primarily affect unskilled, semi-skilled, and manufacturing jobs. Outsourcing of professional jobs is also increasing, with Poland in 2008 gaining several hundred former Irish jobs from the accountancy division of Philips and Dell in January 2009 announced the transfer from Ireland, of 1700 manufacturing jobs, to Poland.

Much of this inflation and rising wages can be attributed to the high minimum wage discussed above. But where was the central bank to deal with this rising inflation?

When Ireland joined the Euro, it lost control of its monetary policy. Normally, a central bank would raise rates and decrease the money supply to fight inflation. But while Ireland was growing quickly, the rest of Europe struggled through most of the 1990s and 2000s with low growth rates and high unemployment. Thus, the European Central Bank (ECB) kept rates low in an attempt to promote growth. As a result, through no choice of its own, Ireland had a loose monetary policy at the exact time it needed a monetary tightening. Thus, Ireland’s economy, most notably its property market and banking system, experienced a huge bubble. We are now suffering the consequence of those previous excesses.

In a true free-market capitalist system, interest rates would have risen through investors’ demand and this would have slowed or stopped the Irish bubble. But the artificial government Euro system prevented this important market process from occurring.

Conclusion

Yes, Ireland was more capitalist than most. But errors like the above led the country to excess and then collapse.

Ireland agreed to a bailout already, but it’s still sinking.

Last weekend, Ireland agreed to an 85 billion Euro bailout ($112.5 billion), details of which should be announced this weekend. But that hasn’t stopped the turmoil. Today, Irish bond yields hit euro-era high, banks sink:

Yields on Ireland’s bonds reached a new euro-era high Friday as investors dumped the nation’s debt securities, and Irish bank shares also kept falling in expectation the banks are heading toward greater state ownership.

Analysts said Ireland’s bonds and banks are getting battered because deep skepticism remains that an international bailout loan – whose details are expected to be unveiled Sunday – will be enough for Ireland to resolve its debts.

The Irish Times said an agreement on an euro85 billion ($112.5 billion) IMF-EU loan for Ireland could be announced Sunday, one week after Ireland formally applied for a financial rescue. It would be used as a credit line by Ireland’s government and banks, which both have been priced out of the bond markets.

Yields on Ireland’s 10-year bonds rose to 9.22 percent from 9.02 percent Friday, a new high since Ireland joined the euro in 1999.

Wasn’t the whole point of the bailout to end or at least alleviate this crisis? But now, the crisis is getting even worse as traders/investors lose confidence in Ireland’s ability to resolve its debts and the Eurozone’s ability to help.

Now, the Eurozone and IMF are proposing a bailout of Portugal. Will that bailout fare any better than this one? As I’ve written previously:

And all the bailouts in the world won’t end this madness until these countries get their fiscal and monetary houses in order.

So far, the bailouts have been a reward to countries that behaved poorly by spending more than they had and making bad investment. Conversely, the bailouts are punishing those who successfully avoided the urge to over-leverage and over-spend.

Bailouts will only work when they reward those who made mistakes in the past but are now behaving well. However, all these at-risk countries are proposing to reduce their budget deficits to three percent of GDP. I do not call that behaving well. I call that behaving less badly than before. Until these countries propose balanced budgets and plans to pay off their debts, they should receive no bailout money. But that is unlikely to happen because those “strong” countries that are providing the bailout money, such as Germany and France, have no plans of their own to balance the budget and pay off debt. Thus, we are in a situation where countries needing to bailed out are providing money to those who are in even more desperate need of a bailout.

The blind leading the blind… And the sovereign debt crisis continues.

Portugal and Spain deny need for aid, but it doesn’t matter what they think or say.

Even if the MSM and government officials did not see this coming, you and I certainly did.  Marketwatch reports:

Portuguese and Spanish officials scrambling Friday to head off speculation that Lisbon or Madrid could soon be forced to seek help to meet their borrowing needs.

A spokesman for the Portuguese government said a report in the Financial Times Deutschland newspaper — that Lisbon was under pressure from the European Central Bank and a majority of euro-zone countries to seek a bailout in order to ease pressure on Spain — was “totally false,” news reports said.

Meanwhile, Spanish Prime Minister Jose Luis Rodriguez Zapatero said in a radio interview that he “absolutely” ruled out a rescue for Spain, saying the nation’s deficit-reduction measures were well under way and that the economy, while still weak, has touched bottom.

OK, so Portugal and Spain continue to deny their need for a bailout or loans from the EU or IMF. Nothing new there. But the market disagrees:

The yield premium demanded by investors to hold 10-year Spanish bonds over German bunds widened to a record 2.63 percentage points as Spain’s 10-year yield continued to climb above 5.10%.

The cost of protecting Portuguese and other peripheral euro-zone sovereign debt against default through credit default swaps, or CDS, continued to rise.

The spread on five-year Portuguese CDS widened by 20 basis points to 500 basis points, according to data provider Markit. That means it would cost $500,000 annually to insure $10 million of Portuguese debt against default for five years, up from $480,000 on Thursday.

The euro fell to a two-month low versus the dollar to change hands at $1.3236 in recent action.

Portugal, with 10-year bond yields above 7%, was long seen as the next most likely candidate to seek a bailout after Ireland. Borrowing costs under the EFSF are seen at around 5% to 6% over three years.

Uh oh! As I wrote in a previous post:

Spain, Portugal, and Italy may not be in trouble, but if people start thinking they are “at risk,” they’ll withdraw their funds and it will become a self-fulfilling prophecy.

Technically speaking, Portugal and Spain may not need help right now, but they will most certainly need help if interest rates rise too much. But the report continues:

News reports, meanwhile, said that Germany this week rejected a suggestion by the European Commission to double the size of Europe’s 440 billion euro ($588 billion) bailout fund for euro-zone governments. The euro-zone contribution is part of the total €750 billion rescue program put in place with the International Monetary Fund in the spring.

Will Europe be willing and able to bail out Spain if it comes to that? Germany appears to be having second thoughts. Why should Germany waste its money bailing out another country? More so, how much money did Spain contribute to the bailouts of Greece and Ireland as part of the EU, money it no longer has to fix its own problems? Germany may want to keep its cash just in case it needs it.

In fact, Germany is one of the best fiscal situations in the entire world. Yet even it is balking. As Margaret Thatcher reported said, “The trouble with socialism is that eventually you run out of other people’s money.” Ireland and Greece have used up much of Europe’s money and good will. Now, there is a lot less left for Portugal and Spain.

Good luck Europe.

Am I really that smart? Or is the EU-IMF that stupid?

The EU and IMF had hoped that bailing out Ireland would end the sovereign debt crisis or at least forestall it for the time being. As I explained previously:

I don’t see how this changes anything. It may stave off immediate default, but Ireland is simply borrowing more money, exactly what got it into this mess in the first place. This simply buys them time to get their house in order, but will they?

I then compare the bailout to Dr. Evil:

These bailouts, loans, and austerity measures in Greece, Spain, Portugal, and Ireland are “an easily escapable situation involving an overly elaborate and exotic death.” Instead of eliminating the deficit immediately, they have convoluted plans to reduce it over a five-year period. Will these plans work? Nobody knows. But that’s okay because “we’ll just assume it all went to plan.”

It only took a few days to prove that I am correct. Marketwatch reports:

European government bond markets were in turmoil Tuesday, as Portuguese and Spanish yields followed Irish yields sharply higher on growing doubts about the ability of politicians to contain the euro zone’s sovereign-debt crisis.

Rising bond yields underline fears that the debt crisis, which has already forced Greece and Ireland to seek bailouts, will spread to other high-deficit countries, potentially shutting them out of credit markets.

The yield premium demanded by investors to hold Portuguese 10-year bonds versus German bunds widened to 4.34 percentage points from around 4.08 percentage points Monday.

The spread between Spanish and German yields widened to 2.32 percentage points, exceeding the spread of 2.27 percentage points seen earlier this month.

How could the EU and IMF really be so stupid to believe their bailout would work. They thought their bailout of Greece and 750 billion Euro backstop would end the crisis once and for all. That failed, but they didn’t let that stop them from making the same mistake again.

It is often said that insanity is “doing the same thing over and over again and expecting different results.” Supposedly, Einstein said as much.

This leaves us with three options:

  1. The EU and IMF are stupid.
  2. The EU and IMF are insane.
  3. The EU and IMF have some ulterior motive.

Which do you think it is?

Ireland gets its bailout. You ain’t seen nothing yet!

So Ireland finally got its bailout. I discuss the true cost of the bailout here and how this is only a temporary solution here.

Focus has now shifted to Portugal and Spain. Ireland is a country with just 4.5 million people, whereas Portugal has 11.3 million and Spain has 46.0 million. People are now guessing at how big their bailout will be if they are needed.

According to The Telegraph:

Analysts estimate that a Portuguese bail-out might require less than euro 50 billion, less than the sum lent to Greece or Ireland. But rescuing Spain from crisis would require a much bigger sum.

Cornelia Meyer, CEO & Chairman, MRL Corporation, told CNBC Monday:

She predicted that a Spanish bailout would likely cost up to 500 billion euros; but there is no “real mechanism” to deal with it, Meyer added.

While a bailout of Portugal would likely be small, a bailout of Spain would be five times greater than that of Ireland.

One thing analysts are forgetting is that the PIIGS also includes Italy. If Italy, with it 60.4 million people, needs a bailout, it could eclipse Spain’s total. Nobody is talking about bailout for Italy, but nobody was talking about bailouts for Spain and Portugal just months ago. If Spain and Portugal take bailouts, focus will then shift to Italy.

If all five PIIGS need bailouts, we are talking about well over a trillion Euros. Good thing money grows on trees.

If this story sounds familiar, it should. It is eerily similar to the US banking crisis in 2008. First Bear Stearns went bankrupt. An isolated case. Then Lehman Brothers. OK, a second special situation. Next was AIG. Then Citigroup, Wells Fargo, Bank of America, and the rest suddenly needed help from the government. BofA, Wells Fargo, etc. may not have been in real trouble when the whole thing started. Instead, it was an old fashion bank run where depositors/investors get their money back because they don’t trust the banks and banking system. Now we are seeing the same thing in Europe. Ireland didn’t need a bailout… until last week when depositors withdrew billions of dollars from Irish banks. Today, Spain, Portugal, and Italy may not be in trouble, but if people start thinking they are “at risk,” they’ll withdraw their funds and it will become a self-fulfilling prophecy.

And all the bailouts in the world won’t end this madness until these countries get their fiscal and monetary houses in order. Until then, the sovereign debt crisis will spread from one country to another.

Ireland gets its bailout. Now who will bail out the rest of the world?

So Ireland got its bailout. Marketwatch reports:

After weeks of insisting that it didn’t need a bailout, the Irish government said late Sunday that it will start formal negotiations with the European Union and the International Monetary Fund over a financial rescue package.

The United Kingdom and Sweden have also indicated that they are ready to consider loans.

Earlier in the day, Irish Finance Minister Brian Lenihan had declined to specify a total figure for the bailout except to say that it would be less than 100 billion euros ($136.7 billion).

The Irish government will put forward a strategy to provide details of €6 billion of fiscal consolidation in 2011 in order to cut the country’s deficit to 3% of gross domestic product by 2014. An overall consolidation of €15 billion is expected to be achieved over the four years to 2014. Irish Prime Minister Brian Cowen detailed in a press conference that spending cuts of €10 billion and tax increases of €5 billion are expected to make up the total amount.

Additionally:

Ireland’s banks will be pruned down, merged or sold as part of a massive EU-IMF bailout taking shape, the government said Monday as a shellshocked nation came to grips with its failure to protect and revive its banks under its own powers.

But the story is far from over.

First:

A “multi-notch downgrade” of Ireland’s Aa2 rating is now the “most likely” outcome of a review of the nation’s sovereign-credit rating, Moody’s Investors Service said Monday in its weekly credit outlook. Such a downgrade would leave Ireland’s rating within the investment-grade category, the agency said. Ireland on Sunday applied for a European Union-International Monetary Fund aid package that is expected to be used to make direct capital injections into the nation’s banks. While the move is positive for the standalone credit quality of the banks, it will shift the burden of support to the Irish government, underline bank-contingent liabilities on the government balance sheet and increase the sovereign’s debt burden, the agency said, “a credit negative for Ireland and, consequently, the credit quality of bank deposits and debt that the sovereign explicitly and implicitly supports.”

And:

Ireland’s Green Party, the junior partner in the coalition government, on Monday said the nation needs to hold a general election in the second half of January, according to Irish state broadcaster RTE. Party Leader John Gormley said he had discussed the issue with Prime Minister Brian Cowen. Gormley said the government needs to produce a credible four-year plan, deliver a 2011 budget and secure funding support from the European Union and the International Monetary Fund. Gormley said people felt misled and betrayed and that the Irish people need political certainty to take them beyond the coming two months, RTE reported.

But Ireland is just the tip of the iceberg. Or maybe Greece was the tip and Ireland is the rest of the above-water portion of the iceberg. But remember, 90 precent of the iceberg lies underwater. Any way:

Any deal between the Irish government and the European Union and International Monetary Fund to resolve Ireland’s financial crisis is ultimately aimed at cutting short the turmoil in sovereign bond markets that policy makers fear could one day price Portugal or even Spain out of global credit markets.

Portugal, which like Ireland is a small economy with a relatively illiquid debt market, is seen as the next country likely to find itself in the sights of bond traders.

Traders and analysts had hoped that a bailout of Ireland would settle credit default fears, but it has done no such thing. Just look at the stock market today which is down about 100 points. Now that Ireland has been bailed out, instead of jumping for joy, traders are turning their attention to Portugal and Spain, wondering not if but how long until they too need bailing out.

And the sovereign debt crisis continues… Just as I predicted months ago.

Irish bailout in perspective. Hello Weimar Republic.

According to this article:

Lenihan said Ireland needed less than euro100 billion ($140 billion) to use as a credit line for its state-backed banks, which are losing deposits and struggling to borrow funds on open markets.

Ireland has been brought to the brink of bankruptcy by its fateful 2008 decision to insure its banks against all losses — a bill that is swelling beyond euro50 billion ($69 billion) and driving Ireland’s deficit into uncharted territory.

To put this in perspective, Ireland has approximately 4.5 million citizens. So Irish banks have already lost about $15,333 per person and Ireland will be receiving a credit line of up to $31,111 per person.

<Sarcasm> Good thing the EU and IMF do not actually have to produce and sell any goods to provide these funds. God bless the power of printing money out of thin air and dropping it from helicopters. If the EU, IMF, and Federal Reserve didn’t have these powers, we’d be seeing a financial crisis the likes of which we have not seen in generation. <End Sarcasm>

We always joke about our government fiddling while Rome burns. But in this case, the government is actually doing something. Too bad it is the wrong something. Instead of throwing water on the fire, they are putting piles of paper money onto the fire. And as we learned from the Weimar Republic, paper money burns just as well as firewood, but is much cheaper.

Doctor Evil’s solution to the sovereign debt crisis

There are three stories out this morning regarding the sovereign debt crisis in Europe.

First off is Ireland:

Ireland is likely to end up tapping a loan worth “tens of billions” of euros as a result of talks between the government and officials from the European Commission, European Central Bank and the International Monetary Fund, the head of Ireland’s central bank said Thursday.

The talks aren’t about a bailout, but will lead to a loan to Ireland that the government would have to accept, Central Bank of Ireland Governor Patrick Honohan said in an interview, according to Irish state broadcaster RTE.

The yield on the 10-year Irish government bond fell to around 8% this morning from 8.3% Wednesday, strategists said. European equity markets rallied, with the Irish ISEQ stock index gaining 1.4%.

I don’t see how this changes anything. It may stave off immediate default, but Ireland is simply borrowing more money, exactly what got it into this mess in the first place. This simply buys them time to get their house in order, but will they?

Now, over to Spain:

Spain sold 3.654 billion euros ($4.943 billion) in 10- and 30-year bonds, but was forced to pay higher yields than two months ago as worries about fiscal problems on the periphery of the euro zone push up borrowing costs. The Spanish Treasury offered 3 billion to 4 billion euros of 10- and 30-year bonds. The government paid an average yield of 4.615% on the 10-year bond, up from 4.144% at a September auction, Dow Jones Newswires reported. The 30-year bond auction produced an average yield of 5.488% versus 5.077% in September. The 10-year auction produced a bid-to-cover ratio of 1.84, versus 2.32 in September, the report said.

The market is relieved that Spain was able to sell its bonds. Again, great news that Spain was not forced to default, but it doesn’t change Spain’s fiscal situation. In fact, one can argue that by lending to Spain is simply enabling one is enabling their addiction.

And over to Greece:

The Greek government on Thursday submitted to parliament a budget plan that it said would allow to stick to its target of reducing its deficit to 7.4% of gross domestic product in 2011 despite a sharp upward revision to its 2009 and 2010 deficit levels. The European Union statistics agency Eurostat earlier this week upwardly revised Greece’s 2009 deficit by nearly two full percentage points to 15.4% of GDP. The government raised its estimate of the 2010 deficit to 9.4% of GDP. The finance ministry said it would further cut spending and boost revenues to meet the 2011 deficit target, taking measures that include a rise in the lower value-added tax rate to 13% from 11%, a levy on highly-profitable firms, cuts in government operating expenditures and a nominal pension freeze.

Greece was forced to take more austerity measures because the economy did worse than expected. I am not surprised by this because the austerity itself hurts the economy, like a medicine that tastes bad but is required to kill an infection. I expect more such bad news over the following years. Government forecasts of narrowing deficits in Europe’s at-risk countries and here too in the United State rely on solid economic growth over the next three to four years. Yet, this optimistic economic outlook will only reduce their deficits, or so they hope, to about 3 percent of GDP. Why aren’t they trying to eliminate their deficits entirely? Why are they relying on optimistic economic growth rates? Has government never heard of “expect the worst, hope for the best?” Instead, they hope for the best and trap themselves in a corner if that does not occur.

All this reminds me of a scene from Austin Powers. Doctor Evil finally captures his nemesis Austin Powers:

Dr. Evil: Scott, I want you to meet daddy’s nemesis, Austin Powers.

Scott Evil: What? Are you feeding him? Why don’t you just kill him?

Dr. Evil: I have an even better idea. I’m going to place him in an easily escapable situation involving an overly elaborate and exotic death.

Later in the scene:

Dr. Evil: Come, let’s return to dinner. Close the tank.

Scott Evil: Aren’t you going to watch them? They’ll get away!

Dr.Evil: No, we’ll leave them alone and not actually witness them dying, and we’ll just assume it all went to plan.

Scott Evil: I have a gun in my room. Give me five seconds, I’ll come back and blow their brains out.

Dr.Evil: No Scott. You just don’t get it, do you?

These bailouts, loans, and austerity measures in Greece, Spain, Portugal, and Ireland are “an easily escapable situation involving an overly elaborate and exotic death.” Instead of eliminating the deficit immediately, they have convoluted plans to reduce it over a five-year period. Will these plans work? Nobody knows. But that’s okay because “we’ll just assume it all went to plan.”

Our governmental leaders may not be evil like Dr. Evil, but they certainly are as naive in assuming their plans will work. And they think we are too naive to notice their plans’ inadequacies.

EU falling apart as Ireland refuses its money and Austria refuses to help Greece.

Marketwatch reports:

Irish officials resisted intensifying calls for the nation to accept a bailout as euro-zone finance ministers prepared to meet Tuesday, insisting the government is capable of fulfilling its debt obligations until the middle of next year.

But that misses the point, economists said. The debate centers on worries about the state of the nation’s troubled banks rather than Dublin’s sovereign-debt obligations for the near term.

European officials are reportedly cranking up pressure on Ireland to accept a bailout in an effort to keep Dublin’s fiscal woes from driving up borrowing costs in Spain, Portugal and other so-called peripheral countries in the euro zone.

Meanwhile, the cost of insuring Irish debt against default rose after declining from record levels Friday and Monday. The spread on five-year Irish credit default swaps widened to 515 basis points Tuesday morning from 497 points on Monday, according to data provider Markit.

The Portuguese CDS spread widened 12 basis points to 425, while the Spanish CDS spread widened to 255 basis points from 250 and the Greek spread widened to 900 basis points from 853.

The EU is basically begging Ireland to take its money. Ireland says it doesn’t need it, at least not now. But the EU is not really trying to help Ireland here. It is trying to show the world that it stands behind the EU nations. The EU is trying to help Spain, Portugal, and Greece by lending to Ireland. But why should Ireland hurt its reputation for those countries?

This “selfishness” is spreading across Europe:

According to Dow Jones (via ForexLive) Austria has decided to withhold its contribution to the Greek bailout, citing failure to make progress on finances.

This is obviously a pretty big problem, since that will spur others to wonder why they’re still contributing to the bailout fund.

So, debtors are refusing to borrow from the EU and creditors are refusing to support the debtors. The European Union is not looking very unified right now.

Anybody who studied basic economics learned that cartels cannot survive forever. From wikipedia:

Game theory suggests that cartels are inherently unstable, as the behaviour of members of a cartel is an example of a prisoner’s dilemma. Each member of a cartel would be able to make more profit by breaking the agreement (producing a greater quantity or selling at a lower price than that agreed) than it could make by abiding by it. However, if all members break the agreement, all will be worse off.

The incentive to cheat explains why cartels are generally difficult to sustain in the long run. Empirical studies of 20th century cartels have determined that the mean duration of discovered cartels is from 5 to 8 years. However, one private cartel operated peacefully for 134 years before disbanding.[7] There is a danger that once a cartel is broken, the incentives to form the cartel return and the cartel may be re-formed.

We are now seeing the EU cartel fall apart. While it is unlikely the EU will disappear entirely, it appears to losing power as individual countries restore their economic sovereignty.