Jeff Byrne

    IF you or I go into a bank or other finance institution to apply for a loan to buy a car or a house or apartment, you have to prove you don’t really need it, before it is granted. Or, more realistically, prove you have the means to repay it with, of course, interest.

    So, why don’t the same rules apply to sovereign states?

    When the eurozone evolved out of the European Union, it put together 17 sovereign states whose economies, cultures and interests were all disparate. They were all required to abandon their own currencies and sign up for a common currency, while they each retained sovereign status.

    What they could have done is creat a united states of Europe, under one government. But this did not happen and the consequence was that many smaller countries with weaker economies saw a road to prosperity by borrowing money to realize their ambitions — a gravy train. The banks and other finance institutions were happy to oblige. But, bear in mind, finance institutions sell nothing but debt. Loans and mortgages become assets, which are then leveraged to create further debt. So here we are, staring into an abyss, with the euro teetering on the edge.

    It was assumed that countries joining the eurozone would perform as well as Germany, the strongest member of the EU. This was simply sleepwalking, or at best, a finger-crossing exercise. More like hand-wringing.

    It should be pointed out that those, who make their living by financing debt, push debt because their existence relies on it. So they spout propaganda that the euro is the problem and not debt. Money must be spent to crank up flailing economies but it must start with taxes — not borrowing.

    The finance institutions have captured British Prime Minister David Cameron. When the eurozone countries met in Brussels a week ago to come up with a solution to the EU crisis, Cameron would not agree to a revised treaty that will tie all 27 EU countries to tighten fiscal union and submit to constraints including taxes on financial transactions. Cameron’s stance was that this would threaten Britain’s national sovereignty.

    That the majority of EU countries agreed was of no consequence. Cameron wants Britain to reap the fruits of a European market for financial services without subjecting itself to EU oversight.

    What he has done is create a them-and-us situation which isolates Britain from “them.”

    If the EU is to drag itself out of this mess, clamping down on borrowing and spending will not be enough. Stiff taxes need to be imposed on those who created the mess — the finance institutions. Corporations also need to be pulled into line and pay their fair share by governments closing loopholes allowing tax breaks and generous subsidies.

    Governments must understand that they cannot spend more than they raise in taxes.

    (The author is a former Shenzhen Daily senior copy editor and writer.)