Who Needs War?

Update 29-Jan-2012: German leaders are currently insisting that Greece surrender control over their fiscal budget allocation to a commissioner appointed by the euro zone finance ministers, a proposal that Greek leaders are calling, "the product of a sick imagination". Once again I ask, who honestly thinks that this power grab by Germany and France can possibly end well?

It has been the goal of a long series of European leaders to achieve absolute domination of the continent, and it finally looks as if Germany will achieve that goal, with the aid of France.

Germany's Angela Merkel and France's Nicolas Sarkozy are pushing for radical changes to the European Union treaty that would provide centralized oversight of individual state budgets.  Since Germans are the ones footing the bill for this foray, they will no doubt expect to be the ones managing these other country's affairs.

It is my expectation, however, that these efforts will fail if they come to a vote in the individual state Parliaments. And, if the changes are not ratified, the individual states will not feel obligated to heed them in any event.  Therefore, this is a risky move that could lead to serious tensions in Europe.

My advice is to let the chips fall where they may.  Greece should renegotiate their sovereign debt obligations for about fifteen cents on the dollar, which is a manageable level for them.  Italy and Spain should do the same, but for about thirty to thirty-five cents on the dollar.  The yields on any new sovereign bonds issued will obviously spike in response, but these higher borrowing costs will help these countries focus their minds on the task at hand, which is to manage their finances in a sustainable way or lose access to the global credit markets.

I see no reason for Germany to bail out the rest of Europe, nor do I see any reason that the Euro can not continue as the common currency, even for use by those states that have had to restructure their sovereign debt.

Radically altering the EU treaty to usurp sovereign parliamentary discretion will simply serve to offend regional sensibilities, and lacking the force of might, will risk an escalation in tensions.