It’s about time in France, to prepare for the upcoming double shock of the banking crisis and the crisis of public finances. It is coming. It will be there soon. And no one gives a serious thought about the scenario of the worst-case; as if it was sufficient, to avert it, not to think about it.
Here is what its progress would be, in ten steps:
1. Greece, no longer having the means to finance its deficits, stops paying off its creditors, a portion of its pensions, and parts of its state employees. All the banks that lent money and all the companies which sell weapons and other staple commodities to Greece suffer losses. Greece does not leave the eurozone nevertheless: no treaty is forcing Greece to do so, nor does it even make it possible; no one can force the Greeks to convert euros they hold in a drachma of lesser value.
2. To bail out the country, the eurozone then refuses to use the scarce resources of the European stabilization Fund, and refuses to create Eurobonds (which only makes sense with a European tax system, to repay them, and a European control of the national budget deficits, to avoid its misuse).
3. For lack of sufficient European financial instruments, the other EU countries leave Greece to its fate.
4. Markets, that is to say essentially the lenders in Asia and the Middle East, are concerned about this abandonment and charge more and more for lending their money to Portugal, Spain, and Italy.
5. The crisis spreads to France, when we realize that its financial situation is not even as good as that of Italy (whose budget, excluding debt service, is in surplus, unlike that of France), and when we become aware that its banks and insurance companies carry a large part of the public debt of the peripheral countries and still hold massive amounts of toxic assets, of no value today.
6. To avoid the collapse of these banks, we seek shareholders, private or public. In vain, and we must find, for the French banks alone, the equivalent of 7% of the GDP.
7. In panic, the European Central Bank then agrees for a massive funding of these banks, once again setting a solvency problem by supplying liquidity.
8. Horrified by this laxity, Germany pulls out of the euro, creating a “Euro +” according to a plan already well prepared which, according to a Swiss bank, costs to each German citizen between 6 and 8000 euros the 1st year, and then 3500-4500 euros annually.
9. The explosion of the euro reveals then to the markets that the Anglo-Saxon banks are not doing better, because they also did not get rid of their toxic assets and because the housing bubble is no longer there to fool people.
10. Then comes the collapse of the western financial system, a great depression, widespread unemployment, and eventually the questioning, even of democracy.
We do not exorcize such a tragedy by refusing to think about it. And since governments do not seem ready to take serious action to avoid it, why not ask the European Parliament to meet in extraordinary session to declare “Constituent Assembly” voting the establishment of a true fiscal federalism, on which depends the survival of everything we have built, since Europe has abandoned barbarism. It was not that long ago.