What You Need To Know About the EU Summit

Posted: Jun 29, 2012 12:01 AM

The EU will meet in Brussels this weekend. All eyes will be on Germany. It’s kind of like a bunch of recalcitrant kids that have blown through all their money at college. Now they want Mommy and Daddy to keep writing checks and they’ll promise to do better this time.

Spain has seen interest rates rise again, and is on the brink again. They cannot fund their deficit at these high rates because their economy can’t grow. The rest of Europe isn’t a heckuva lot different. It’s like varying shades of grey. One is darker than the next, but you can still see that they are in the same color family.

The Wall Street Journal summed it up best,

“There are signs from the top level of the German government—the chancellery and the finance ministry—that they are ready to go into the direction of some levels of banking union,” namely limited funding for winding down failing banks in return for transferring oversight to a powerful supervisor, Mr. Emmanouilidis said. But he said joint European guarantees for bank deposits, which many analysts say are needed to restore confidence in debt-ridden countries, are probably a long way off.

As I told Rick Santelli of CNBC on the floor yesterday, the EU reminds me of the Black Knight in Monty Python. Parts of the body keep getting cut off and they are bleeding to death. When the crisis first manifested itself, I thought that they ought to immediately let the Greeks go it alone. Kick em out. Tough love would have sent a shiver up the spines of the other countries and they might have gotten fiscal religion. Instead, they have used a patchwork of worthless band aids and they are still in the same spot they were over a year ago.

Now I am thinking that instead of cutting off the profligate countries, Germany ought to separate itself from the EU and allow them to fend for themselves. In the long run, I think the opportunity cost to the German people and their fiscal sanity is less by breaking away than if they agree to prop the entire continent up. Which is what the socialists of Europe want to happen.

“Give me your money, but let me keep control of it.”

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