One of the most exciting publications during the Christmas season was a book by Prof. Philipp Bagus entitled "The Tragedy of the Euro". Bagus is an associate professor of economics at Universidad Rey Juan Carlos, Madrid and a visiting professor at Prague University. He has long been one of the most vocal critics of the monetary union as he cried, like the ill-fated Cassandra, in vain for fiscal sanity during the boom. He has now provided us with the intellectual muscle needed to counter the propaganda and spin advanced by the intellectuals and fanatics of Euroland.
His introduction lays out clearly what he intends the reader to learn from his book:
"The project of the Euro has been pushed by European socialists to enhance their dream of a central European state. But the project is about to fail. The collapse is far from being a coincidence. It is already implied in the institutional setup of the EMU, whose evolution we will trace in this book. The story is one of intrigue, and economic and political interests. It is fascinating story in which politicians fight for power, influence and their own egos."
In this work he traces how differing concepts of European unity have been fighting it out for decades. On the one side are the founders of the European project, men such as Konrad Adenauer from Germany, Robert Schuman from France and Alcide de Gaspari from Italy, all practicing Catholics. Their view was of a Europe of independent sovereign states who cooperated in the removal of the protectionist walls and tariffs that had crippled European trade in the 1930s, brought about vast food shortages and brewed toxic hostility between nations. Their view of Europe Bagus describes as "the Christian view" of Europe, built largely upon the Catholic social teaching of "subsidiarity", the idea that social matters ought to be handled by the smallest, lowest or least centralized competent authority.
Opposed to "the Christian view" of Europe was what Bagus describes as the "socialist view" or "empire view" of Europe. These men, many of whom were of French extraction such as Jacques Delors and François Mitterrand, dreamed of a single European government ruling the entire continent. They were simply the resurrection of the pre-war ideologues of Europe in new clothes who sought the annihilation of national identity and Europe's cultural legacy.
In the midst of all this lay the central problems of European unification, especially the currency problem. Bagus brilliantly re-counts the political and economic warfare that took place behind the scenes in the decades leading up to the establishment of the European Monetary Union. In particular, he explains how the French government held Germany to ransom and threatened to prevent the unification of East and West Germany lest Germany sacrifice its treasured Deutschmark to the EMU.
To the layman, this is an essential read to understand how the international banking system operates and why it is so unstable. To Bagus, the clock is ticking down before a crisis an order of magnitude greater than the current one humbles Europe to its knees. He is intent to ensure that the layman can articulate what the causes were and what the solution has to be so he will not be led astray by the plethora of poorly thought-out solutions the public is presented with as being "the only alternative". The solution of course is a return to the rule of law in the banking system that has been given special privileges for too long in the name of the unsound and destructive economic doctrine of Keynesianism.
This review appear in the Sovereign Independent Newspaper in Ireland in January 2011.