Blutarsky previously said:

OP-ED CONTRIBUTOR
Euro Trashed
By JOACHIM STARBATTY
Published: March 28, 2010
Tübingen, Germany

THE European Monetary Union, the basis of the euro, began with a grand illusion. On one side were countries — Austria, Finland, Germany and the Netherlands — whose currencies had persistently appreciated, both within Europe and worldwide; the countries on the other side — Belgium, France, Greece, Italy, Portugal and Spain — had persistently depreciating currencies. Yet the union was devised as a one-size-fits-all structure. As a result, some countries had to use creative accounting to satisfy the fiscal criteria for entry — Greece, it’s long been known, went so far as to falsify its debt and deficit numbers.

Germany and other “euro-optimists” hoped that the introduction of a common currency and the global economic competitiveness it spurred would quickly lead to sweeping economic and societal modernization across the union. But the opposite has occurred. Rather than pulling the lagging countries forward, the low interest rates of the European Central Bank have lured governments and households, especially in the southern part of the euro zone, into frivolous budgetary policies and excessive consumption.

The Greek crisis is only the first of what could be several tremors resulting from the euro’s original sin. While few are willing to say it yet, the solution is clear: the only way to avoid further harm to the global economy is for Germany to lead its fellow stable states out of the euro and into a new and stronger currency bloc.

The notion of a single euro zone economy is false. Unlike their northern neighbors, the countries in the zone’s southern half have difficulty placing bonds — issued to finance their national deficits — with international capital investors. Nor are these countries competitive in the global economy, as shown by their high trade deficits.

These problems are only worsened by euro membership. If Greece were outside the euro zone, for example, it could devalue its currency to make it more competitive, and its foreign debts could be renegotiated in an international conference.

Instead, the fiscal strictures of the euro zone are forcing the country to curtail public expenditures, raise taxes and cut government employees’ salaries, actions that may push Greece into a deep depression and further undermine its already weak international credit standing. The alternative to this collapse, having other members of the euro zone assume its debt payments, is no better. Doing so would be a signal to other debtor countries that they could abandon their own remedial efforts and instead count on foreign assistance. The creditor countries would be brought to their knees.

In short, the euro is headed toward collapse.

Despite a ban on bailouts within the monetary union, last week the euro zone states agreed on a plan to provide Greece with an economic relief package if no other solution is found in the next few months. The plan not only undermines a core justification for the euro — continental fiscal discipline — but, according to a 1993 ruling by the German Federal Court, it would violate the monetary union’s founding treaty and therefore allow member states to withdraw.

If Germany were to take that opportunity and pull out of the euro, it wouldn’t be alone. The same calculus would probably lure Austria, Finland and the Netherlands — and perhaps France — to leave behind the high-debt states and join Germany in a new, stable bloc, perhaps even with a new common currency. This would be less painful than it might seem: the euro zone is already divided between these two groups, and the illusion that they are unified has caused untold economic complications.

A strong-currency bloc could fulfill the euro’s original purpose. Without having to worry about laggard states, the bloc would be able to follow a reliable and consistent monetary policy that would force the member governments to gradually reduce their national debt. The entire European economy would prosper. And the United States would gain an ally in any future reorganization of the world currency system and the global economy.

Moreover, should the United States fail to put in place a politically credible strategy to lower its own debt and move away from its zero interest rates, the new, more powerful euro could easily supersede the dollar as the global safe-haven currency.

This is not necessarily in anyone’s interests. Though it might benefit Europe in the long run, a move away from the dollar would cause global economic instability that would hurt surplus and debtor nations alike. But with the United States nowhere near to reducing its debt, the possibility of a catastrophic plunge in faith in the dollar cannot be ignored.

Better, at least, to have a solid fallback currency to which global investors could flee. The euro, as it now exists, could not be that currency. But a stable, revitalized euro could.

Joachim Starbatty is a professor emeritus of economics at the University of Tübingen. This article was translated by John Cullen from the German.

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Dutch sidestep EU red tape to rescue German ship



Photo:In this image released by the Royal Dutch Navy Monday April 5, 2010, a boarding party slides down a rope from the frigate Tromp's Lynx helicopter onto AP

Slideshow:Somali Pirates


By MIKE CORDER, Associated Press Writer – 47 mins ago

THE HAGUE, Netherlands – Gaining fast on the pirates who had seized a German freighter, Dutch naval captain Col. Hans Lodder had no time to waste on bureaucracy.
Sidestepping the command of the European Union's anti-piracy task force, he went instead to his own government for authorization to recapture the ship by force.
Lodder first ascertained that the Taipan's crew had locked itself in a bulletproof room. Then he launched his ship's Lynx helicopter with a team of six special forces marines.
With troops providing cover fire from the helicopter, the marines rappelled onto the ship's deck of the MV Taipan to shoot it out, if need be, with the pirates. But they met no resistance. The 15-man crew was rescued, and 10 Somali pirates were captured.
"The pirates surrendered the moment they saw the marines," Lodder said in a telephone interview Tuesday from the Dutch frigate Tromp. No one was injured.
Monday's successful rescue showed that, when swift decisions are needed, it can be quicker to work around the European Union's command.
It was the first time a Dutch ship involved in the EU mission had used force to recapture a hijacked ship. An EU spokesman could not immediately recall any incident when troops under EU command had boarded a seized ship under the threat of fire.
Lodder said he decided to seek permission from his own command for an "opposed boarding" — one where pirates may resist — rather than act under procedures laid down by Brussels.
"We just told my force commander we would operate under national command until after the boarding," Lodder told The Associated Press. "We kept everyone in the EU informed of everything we did."
A spokesman for the EU mission acknowledged the Dutch action avoided a delay and was legitimate.
"For speed of reaction, if you're on the spot ... (and) dispatched at haste to react to something immediately, the best thing to do is to go under national command," said Cmdr. John Harbour, U.K.-based spokesman for the European Union Naval Force Somalia.
"If we were about to conduct an operation with a bit more time on our hands then we may well have gone through the standard EU process with a view to consulting," he added. "That consultation just takes a bit longer."
Harbour also said the Taipan was sailing outside the zone covered by the EU mission when it was rescued, about 800 kilometers (500 miles) east of Somalia.
Dutch Defense Ministry spokesman Robin Middel said EU authorization was sidestepped to speed up the rescue.
Bibi van Ginkel, a senior research fellow at the Clingendael think tank's Security and Conflict Program in the Netherlands, said opting out of a multinational mission was possible at sea because ships are sailing under their national flags anyway.
It would be more difficult in land-based peacekeeping missions because the nations involved operate under the jurisdiction of the country they are deployed to, she said.
The Tromp may turn over the 10 captured Monday to German or Dutch prosecutors for what would be a rare European piracy trial.
Pottengal Mukundan, director of the Commercial Crimes Services of the International Maritime Bureau in London, which monitors pirate attacks, praised the Dutch rescue operation.
"It is unusual and very welcome" that a navy recaptures a ship from pirates, he said. "That is absolutely the right thing to do. By denying the pirates their prize it does deter them from taking these actions."
Harbour, of the EU naval force, said the Dutch mission highlighted not the EU's laborious decision-making processes, but rather its ability to navigate a way quickly through them.
The Dutch rescue mission came a day after suspected Somali pirates hijacked a South Korean-operated supertanker carrying about $160 million of crude oil in the Indian Ocean. A South Korean navy destroyer caught up with the tanker on Tuesday and was sailing nearby.
South Korea's navy received a call Sunday from the South Korean-operated 300,000-ton Samho Dream, sailing from Iraq to the United States, saying three pirates had boarded it and then lost contact.
At the time, the tanker was about 930 miles (1,500 kilometers) southeast of the Gulf of Aden. It has 24 crew — five South Koreans and 19 Filipinos.
The destroyer caught up and began operating near the hijacked supertanker as of early Tuesday South Korean time, which was late Monday where the ships were operating, South Korea's Foreign Ministry said in a statement.
The tanker was sailing toward Somalia's coast, the ministry said.
Mukundan said his organization has logged 42 attacks on shipping off the Horn of Africa so far this year including 10 hijackings.
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Associated Press Writers Sangwon Yoon and Hyung-jin Kim in Seoul, South Korea, Tom Maliti in Nairobi, Kenya and Amy Shafer in Chicago contributed to this report.