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The Franco-German Relationship is Clinically Dead

The 1992 Treaty of Maastricht came two years after the unification of Germany and laid the groundwork for the 2002 introduction of the euro. The French elite was afraid for the resurgence of a new German powerhouse. To eliminate the dominant Deutschmark, they wanted to extend the use of the German currency to the whole European Common market and have it renamed to the euro. In 1992, Le Figaro wrote that the “Maastricht is the Treaty of Versailles without war”. A French observer noticed, “Maastricht is only a calculated move against the predominance of the Bundesbank and against an independent German currency.” Continue reading →

Grexit has never been from the table

TsiprasIn Gefira #0 we wrote that the Greek crisis was never solved. Greece is disconnected from the European banking system TARGET2, and capital control is still in place. Now Brussels is sealing off the border between Greece and Europe to stem the flow of refugees to the European heartland, severing Greece from the Schengen Area. It is not the question if the country will leave the euro but rather when it will start issuing the drachma. Tensions between Brussels, IMF, and Greece are increasing, implying a Grexit has become a contingency that one has to reckon with very seriously. A Grexit will strengthen the euro and increase its value against other currencies, as the euro bloc without Greece will become much stronger. That said, in the long run the euro has become a project that is crippling European economies. Continue reading →

Europe has to resign from its pension systems

pension_qDemographic trends that are taking place are having an adverse effect on pension systems. Some experts are painting a black picture: pension systems will collapse. Others, especially those in the pay of the governments, assure us of their stability. We had better ask whether the economies of the countries concerned will support their pension systems because the ageing societies certainly will not.

Pension systems are not only about elderly people. They are constructed on the basis of a contract between generations or, to put it otherwise, on the concept of social solidarity: people who are currently economically active provide in the form of pensions for those who are not. That’s the first, the main pillar of the pension system, often referred to as the pay-as-you-go pension plan. Continue reading →

All war presupposes human weakness and seeks to exploit it.

By Karl wilhelm Wach (http://www.nodulo.org/ec/2007/n066p13.htm) [Public domain], via Wikimedia Commons

Sending refugees to Greece and prosecuting Europeans is merely the continuation of policy by other means. Erdogan shows himself to be a good pupil of Clausewitz. Ankara’s objectives are the integration with the EU and gaining financial support from the EU on Turkish terms, as we explained in April Gefira #3. To this end Turkey heavily relies on its nationals in Europe to heighten tension with Berlin and the European Commission, carrying it almost too far. European citizens see that Erdogan is getting the upper-hand over the weak European politicians: Merkel’s popularity is now plummeting across the continent, so that the chancellor may even be forced to step down as a result of Erdogan’s political maneuvering. Continue reading →

Turkey is Preparing for the Euro without European Union Membership

Image1Our analysts do not believe that all the players want to debase their currency. Monetary policy is a part of geopolitics which is why currency exchange rates matter for international relations and the international position of a country. Since Brussels thinks Turkey has become indispensable to maintain a relative calm in Europe, President Recep Tayyip Erdogan can demand whatever he wants from the European elites. And since the falling Turkish lira has become a burden for the Turks, why not ask for what is most important in the European Union: the euro. Eurozone membership without EU membership seems to be unimaginable, but for the successor of the Ottomans nothing is impossible.

Having the euro – a strong, reserve currency – can be advantageous to a country for which the EU is the biggest trade partner. Introducing the euro would be proof of internal success and could increase Turkey’s status in the region. And finally, once you have the euro, what could stand in the way of full EU membership? Subscribe To Gefira or download your copy.

The Dutch Holding World’s Largest Pension Funds are Raising the Pension Age to 72

pensionMonetary policy does not only influence geopolitics but also the daily life of Europeans. “Geopolitical monetary policy”, the coordinated policy of the Fed, BoJ, and the ECB, also affects the life of ordinary pensioners and pension savers. Monetary policy such as low interest rates can be devastating to pension funds and schemes. While we have known for decades that the European Union has to deal with an aging population, zero or negative interest is something completely new. The consequences for Europeans will be drastic: pensions will be cut and the retirement age will be increased to 72 or even higher. In this Gefira we take a closer look at why the next generation of retirees will be the first after World War II not to draw their pension at 65, a generation that will be confronted with an underfunded and unsustainable retirement system. Subscribe to Gefira or download your copy.