Dafydd at Big Lizards ("everything in this site is under construction, except for the blog") made some predictions that seem a lot less crazy than they would have even a year ago.
(DISCLAIMER: CAA is not any sort of economist by training, education, or inclination.)
Money quote(s):
"We all know that something is rotten in the state of the European Onion; but I'll be the boldest by staking out this prediction:
Within six years from today, by September 14th, 2017, the European Union as a political body will cease to exist except on paper. And the whole sorry farce of "United in Diversity" will be nothing more than a vivid and utopian opium dream."
Recall that there are/were a host of lesser-and-or-included international organizations still persisting in sort of a state of suspended relevence, such as the WEU and other various treaty-generated bodies.
The EU, which is only the latest phase of long string of existances which began as a steel and coal consortium, will likely continue some sort of legal existance, even if only as a collection of surviving components.
In a similar fashion, some portions of the former League of Nations survived to be incorporated into the U.N.
"The Euro will no longer be a semi-pan-European currency; each country will revert to its native currency -- lira, deutschmark, drachma, pound sterling (all right, all right, the last never actually disappeared) -- and the Euro will only be honored as trade-in on the local national currency."
Speculation on just how that would be implemented is already making the rounds of the blogosphere.
(I particularly like the notion of checking ones Euro currency and coinage and separating out the ones printed/minted in other EU countries, then exchanging them until you only have those from you own country. Although I kinda/sorta/really doubt that would make any practical difference in the end.)
Back in the real world, you can already see news reports of capital flight such as from Greece to the U.K.
"(T)he EU (pronounced eeew!) has never really existed except on paper in the first place. Nobody really believes that Greece, Portugal, France, Spain, Germany, Bulgaria, Latvia, and the UK (pronounced yuck!) are all contained within a single geopolitical unit. It's impossible and insane.
But I mean something stronger: Under my prediction, nearly all the political entities putatively absorbed into the EU, and all of those with functioning economies without exception, will have formally repudiated any supernational "sovereignty" of the European Union; if it exists at all, it will be only as a "free-trade zone." "
Oddly, the "free-trade zone" is the single most practical and useful part of the EU. I hope it survives.
"(I)it's already happening; and the trigger has been the looming debt defaults (often driven by bank failures) and proposed and actual bailouts of perpetual paupers Greece and Portugal; countries with serious deficit and debt problems, such as Italy, Ireland, and Spain; and even the very powerhouse economies that are called upon to bail out everyone else: Germany, France, and the United Kingdom. (Ireland and the UK are in trouble mostly because their banking systems are integrally tied into their federal budgets.)"
What goes unmentioned here is how much debt paper from the PIIGS is held by the major banks in the "powerhouse economies" (esp. France and Germany). The last thing those countries want is for the music to stop and for those "investments" to be written down (or off).
"Take Germany as one example; it doesn't want to bankrupt its relatively good economy with a succession of bailouts to the many countries in the EU that face imminent economic collapse. But on the other hand, I doubt Germany is anxious to be made into the scapegoat for the political implosion that might result from denying those bailout loans.
And there are likely legal consequences, too: By joining the EU, Germany and the other member states accepted the jurisdiction of the Court of Justice of the European Union. If the other strong economies (France, the UK, others) bought into the loan package, but Germany refused, the contributors might be able to go to the Court of Justice and try to force Germany to comply.
I have no idea whether the CoJ has either jurisdiction or authority to force a member state to join a bailout... but my guess is that neither does anyone else; I strongly suspect that the rules of that court are kept deliberately vague, allowing tremendous latitude for the court itself (and favored litigants), and tremendous risk for Germany, or any other member state thwarting the decisions reached at the upper reaches of the European Parliament. I wouldn't be surprised if there was some provision allowing Germany to be haled into the dock at Luxembourg and hit with fines and potentially political punishment.
Bottom line, I don't think it's feasible for Germany to refuse to lend the money, but still remain in the European Union. (Note that this same analysis applies to every other member state expected to pour its treasure into rescue packages for the basket cases.)"
How many divisions has the CoJ? Jurisdiction or authority notwithstanding, exactly how does Brussels expect to force Germany to do anything?
"In the end -- if not for this bailout, then for the next, or maybe the one after (that's why I gave my prediction a six-year time span) -- the rich states will not crucify themselves upon a cross of continentalization. Either the current government, or else the next, after that government falls, will run for election on the platform of withdrawing from the EU, notwithstanding the fact that there is no provision for unilateral withdrawal.
Once some nation, Germany or another, punches the first hole in the dike, the other EU member states who have a functioning economy will disassociate from the Union rapidly. If stable states are reluctant to bankrupt themselves propping up the perpetually collapsing states, think how much more reluctant they'll be when one of more of their fellows in stability opt out: "Why should we pay tens of billions to Greece and Portugal when Germany isn't paying a single deutschmark?", the next state will cry... and that argument is pretty unarguable." (Emphasis in original text. - CAA.)
For the moment, I expect more deckchair shuffling, and perhaps the morphing of the Eurozone into a two-tier arrangement.
On the other hand, as a consular officer I believe it's incumbent in my duties to thing-the-unthinkable and do some worst-case-scenario crystal ball reading in order to anticipate some worst-case contingencies. In the event the Eurozone were to come unglued, what happens to the tens of thousands of American travelers and tourists passing through when their bank cards stop working (or worse).
