Schuman Project

the origin, purpose and future of the supranational Community of Europe








Learn about Schuman's life


What contemporaries thought of Schuman 



ANALYSIS OF Robert Schuman's Proposal of 9 May 1950 

Was the Proposal the start of a European Federation?



Europe's democratic institutions
FIVE institutions for Europe


Schuman on Democratic Liberty


What is the difference between a federation or a supranational Community?







WARNING! Counterfeiters of European History OFFICIALLY at Work! 



What did Schuman say about post-Soviet Europe? 








EU's ENERGY non-policy 

 How to manage disastrous CLIMATE    CHANGE 







Europe's Geography already extends worldwide!  
Is Turkey European? Is Cyprus? Is Russia?   




 Enlargement: long awaited! Collect EU's 5 keys 


































Back to Welcome page


Avalanche2 : 

Is Mr Soros right that the Euro crisis could bring about the destruction of the EU?

Posted on 28/06/10

The euro crisis could lead to the destruction of the European Union,’ announced George Soros on 23 June 2010 in Berlin. Is the Hungarian investor/ economist right? He was right in 1992 that the British Pound Sterling was going to have to devalue by dropping out of the European Exchange Rate Mechanism (ERM). He made a fortune out of it — about 1 billion dollars — by short-selling Sterling. The UK lost more than three billion pounds. It is reported that the UK spent some 27 billion pounds from reserves in supporting the pound.

Will now the whole European structure — created sixty years ago as the European Community — implode? Is system that brought peace after two thousand years of warfare DOOMED?

According to Mr Soros the whole European experiment is under threat of destruction. However, according to Mr Robert Schuman, the originator of the system, it would last for a great deal longer than 50 or 60 years.

In Mr Soros’s analysis: ‘It can be seen that the euro crisis is intricately interconnected with the situation of the banks.‘ that provided loans to weak or vulnerable countries inside the EU. He names Greece, Spain and Ireland.

How did this connection arise?‘ he asks.

His answer: ‘The introduction of the euro brought about a radical narrowing of interest rate differentials. This in turn generated real estate bubbles in countries like Spain, Greece, and Ireland. Instead of the convergence prescribed by the Maastricht Treaty, these countries grew faster and developed trade deficits within the eurozone, while Germany reigned in its labor costs, became more competitive and developed a chronic trade surplus. To make matters worse some of these countries, most notably Greece, ran budget deficits that exceeded the limits set by the Maastricht Treaty. But the discount facility of the ECB allowed them to continue borrowing at practically the same rates as Germany, relieving them of any pressure to correct their excesses.

I would put it slightly differently. Some governments tried to conceal their vital statistics so they could obtain loans by sleight of hand. Everyone in the country then thought then they could get away with the same deceit. Moral: governments should have the highest standards of probity, not the average manifestation of corruption. Secondly, everyone knows that not all governments have the highest standards. Certainly if banks accept paper promises of governments who are known to be cheating (some exposed for about thirty years), it is bound sooner or later to cause grief.

Take the example of the property boom — what Mr Soros refers to as real estate. It requires a good dose of self-deception to believe that crumbling bricks and mortar have suddenly and universally become more and more valuable as an asset. Who is fooling whom?

Japan gave the lie to this property bubble deceit a few decades ago. The centre of Tokyo around the imperial palace briefly became worth much more than the entire American economy. The bubble burst. The property emperors had no clothes. 

Japan is still paying for this folly. If some European governments have had to make sharp corrections for their folly, it is still rather less than the decades of woes that Japanese are paying.

Two economic laws are apparent. The law of the coming crunch: A proclivity to fiddle the books and spend produces (a) a desire for more money from silly creditors (which initially gives a false sense of security about profits) and (b) bad feeling among the creditors who then wake up will eventually cause many creditors to lose their patience.

The second is the law of the Community correction. The Community is designed as a closed system to expose dishonest dealing by governments or private sector banks — and correct it. All members have the right to look at what sort of tricks the other members are up to. This is a fundamental feature of Community law. Any individual can under Community law take such a cheat to Court if his or her livelihood is affected by it. Usually it is States who take other States to Court, or the Commission.

Other members will eventually force the cheats to stop. It will all end in tears. However the Community system makes a huge difference. Happily, step by step, cheats are led to repentance. A totally reformed, former cheat welcomed back into the Community can become a solid example of probity for all the others.

The present challenge is small compared with the challenge of starting the Euro, as a common currency, in the first place. Much hard work has yet to be done as the Euro’s creation was hardly based on authentic Community altruism — the essential feature of the supranational principle. There remain several vulnerable spots. The exception governments give to the property market is one example.

However, there is no question but that the European Community system will outlast its critics.

Am I being too optimistic? My assessment is not based on wishful thinking but scientific conclusions and hard facts. Which country is the keenest on sound currency principles? A clue: it was the country that had one of the worst currency problems in the past. Not just the Weimar inflation in the 1920s (when people carried their wages in wheelbarrow loads of useless paper currency) but also the experience which distorted the trade patterns for the whole of Europe with Hitler’s economics in the 1930s. He had a hollow, complex, barter system creating political dependence and where other currencies were discounted to Hitler’s rates.

Germany learned about sound currency in practice when it was given a democratic constitution in 1949. A year later it acknowledged a desire to join the European Community which reinforced sound monetary policy. The need for sound money began the moment that the first single market was opened. When did that happen? The exact date is 10 February 1953.

The European Monetary System was a logical part of the first European Community system that the Six governments and their peoples signed up to. The supranational principle, all the founding fathers said, provides the means for the democratic organisation of Europe. That is what the Europe Declaration of Inter-Dependence says, the foundational document for the present European Union.

Schuman saw the European Community as a great democratic experiment, where the population would learn wisdom by pragmatic choice Sometimes governments make the wrong decisions, they are subject to apathy to introduce democratic measures — like the mandatory elections they have never introduced. Sometimes they are corrupt. some leaders may be autocratic. However, the European Communty system is built to provide a positive learning curve for European civilisation, based on two thousand years of living and sometimes squabbling together.

But is this above analysis all the story? Is it even the most important factor in the present crisis? Was the ‘euro crisis’ fuelled and then ignited by the combustibility of low interest rates? Has something been forgotten? Is this a myopic view that leaves out dire warnings made to European leaders consistently for more than half a century?

I hope to deal with that later.