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Europe is going to begin both capital and border controls.
This is not some idle conjecture. We know that the political elite in
Europe are only too happy to ignore the rule of law whenever the crisis gets
too out of hand. Indeed, this won’t even be the first time that
this happens in the EU.
Back in March of 2012, when the EU Crisis first began to spin out of
control, then Prime Minister of France Nicolas Sarkozy openly called for the
renegotiation of the Schengen Treaty: the treaty that established the
26-nation EU as a “borderless” entity in which individuals could move from
one country to another with little difficulty and which also made trade among
EU members easier.
France was not alone either. A few months later, both France and Germany
proposed imposing border controls in June of that same year.
A
Vote of No Confidence in Europe
Germany and France's joint proposal to allow Schengen-zone
countries to temporarily reintroduce border controls as a means of
last resort might sound harmless. But doing so would damage one of the
strongest symbols of European unity and perhaps even contribute to the EU's
demise.
Germany and France are serious this time. During next week's meeting of
European Union interior ministers, the two countries plan to start a
discussion about reintroducing national border controls within the Schengen
zone. According to the German daily Süddeutsche Zeitung, German
Interior Minister Hans-Peter Friedrich and his French counterpart, Claude
Guéant, have formulated a letter to their colleagues in which they call for
governments to once again be allowed to control their borders as "an
ultima ratio" -- that is, measure of last resort -- "and for a
limited period of time." They reportedly go on to recommend 30-days for
the period.
http://www.spiegel.de/international/europe/ge...y-a-828815.html
What triggered such a move?
A GREXIT: the exact same issue that is once again being tossed around.
Indeed, as the below story from June 2012 shows, EU leaders were
proposing capital controls, border controls, and even limiting the amount of
money that could be removed from ATMs throughout Europe.
Exclusive: EU floats worst-case plans for Greek euro exit: sources
European finance officials have discussed as a worst-case scenario
limiting the size of withdrawals from ATM machines, imposing border checks
and introducing capital controls in at least Greece should Athens decide to
leave the euro…
As well as limiting cash withdrawals and imposing capital
controls, they have discussed the possibility of suspending the Schengen
agreement, which allows for visa-free travel among 26 countries, including
most of the European Union.
http://money.msn.com/business-news/article...amp;id=15208663
If you think anything has changed in Europe between 2012 and today, you’re
mistaken. Europe’s banking system and monetary union remain as fragile as
they were then, if not more so.
The European banking system as a whole is leveraged at over 26 to
1. That’s the ENTIRE European Banking system leveraged at near Lehman levels
(Lehman was 30 to 1 when it collapsed).
To put this into perspective, with a leverage level of 26 to 1,
you only need a 4% drop in asset prices to wipe out ALL capital. What are the
odds that European bank assets have fallen 4% in value in the last two years?
The European crisis is not over. And when the next round really hits,
whether it be from Greece leaving the Euro or some other issue, both
capital and border controls will be implemented.
Europe came this close to such a situation in 2012. This time
around the ECB won’t be able to pull it back from the brink.
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