The expression “a descent into farce” is meant to describe a terminal condition – where things have become as ridiculous (or whatever pejorative term you desire) as they can get. I think the Euro elites are carving out new grounds that will require some new terminology. Their latest iteration – the second Cyprus bailout deal – is about as bad as it gets. You would think anyway. But given the capacity to outdo themselves with incompetence and sheer bastardry, I will await further developments before I consider the latest action to be the terminal condition. It almost beggars belief that highly paid and obviously self-important senior officials (such as the Dutch Finance Minister who is the head of the Eurogroup of Finance Ministers) could in one breath say one outlandlishly stupid remark to the media and then, in the next breath, repudiate that statement with another equally nonsensical statement that flies in the face of fact and practice. So if anyone out there wants to speculate on “What comes after farce?” please let us know. The problem is that as a slapstick comedy this rates among the best except in this case, millions are unemployed. But it goes further with the Cyprus fiasco – and the Dutchman’s hints of a new model forming. First, the unemployed and poor are bearing the risks of a failed capitalist economy. But now, the consumers are being forced to take losses. Where the hell are all the capitalists? Probably wining and dining with their Euro elite mates in Brussels.

Cyprus is a small country of some 839 thousand people. It joined the Eurozone on January 1, 2008. That decision sealed its fate. Now the Troika are making it pay for that mistake, one that the Troika lured it into making. Such is the way of the Eurozone. The elites set the system up to suit their ideological preferences. Lure the local national elites who aspire to wine and dine in style in Brussels into becoming pro-Euro. Then attack the ordinary folks when the system collapses. But as we know, the Eurozone was a system designed to fail as soon as the first major negative aggregate demand shock hit. The shock hit in 2008. The system failed. Since then the elites have been divining ways to push the costs of those mistakes onto those who are least able to pay. How many Euro decision-makers are unemployed as a result of the crisis? How many Euro decision-makers who have since retired have lost any pension entitlements? But now the citizens of Cyprus are having their savings plundered by the Troika. The shamelessness seems to have no bounds. It is not even a strategy that will deliver the outcomes they have defined. The elites go from one blunder to the next and meanwhile all the key economic targets continue to deteriorate (like employment growth etc). And even the irrelevant targets that are the obsession of the elites also move in the opposite direction to that intended. If it wasn’t so tragic it would be the comedy of the century.

There was an article in the Financial Times last week (February 12, 2013) – Europe’s labour market reforms take shape – that claimed that Spain was on the path to glory by hacking into rights of its workforce (that is, the 75 odd percent that still have jobs). It followed another Financial Times article (February 11, 2013) – Productivity is Europe’s ultimate problem – written by the deputy managing director of the IMF and redolent of the ideology that organisation spins as facts. Both articles are part of a phalanx in the conservative press that prefer to lie rather than relate to the facts. Apparently we have a new poster child – Ireland was the first one (now forgotten as it wallows in the malaise of fiscal austerity). Now, Spain is the go – a model for savage labour market reform and export led growth. Well it is a model – for how to ensure the unemployment rate and poverty rates continue to rise and you produce an economy that stops employing its 15-24 year olds. Some poster child! Spain is not an example of reform success. Rather, it demonstrates how misguided the policy debate has become and how a policy devastation is now being seen as good. Truly bizarre.

There was a report – Poverty in Australia – released over the weekend by the Australian Council of Social Service, which brought the reality of our lying federal government home- 1 in 6 Australian’s are living below the poverty line (which itself is a very low hurdle for an advanced nation to have to clear). I will dedicate a separate blog to that in the coming weeks. But the Federal government needs to face facts and stop adding to the despair of millions of Australia as part of its ideological and political obsession with budget surpluses. This brazen disregard for the most disadvantaged citizens probably qualifies the Government for a Nobel Peace prize, although I was thinking of nominating the IMF and the OECD to be joint recipients for 2013. They would join the current recipients, the EU and a host of other “deserving” winners over the last several years. I guess in awarding this year’s Peace Prize to the EU, the Nobel Prize Committee is trying to bring their main prizes into line with the rogue Economics Prize in terms of quality and deservedness of the winners.

The Wall Street Journal carried an article on Wednesday (September 12, 2012) – Latvia Remains Keen on Euro – which reported that the queue to enter the Eurozone remains healthy. I immediately asked why? There is a queue of nations (east and Baltic) who desire to join the Eurozone. The public debate in those countries must be so distorted by the elites for the public to go along with that. The very small gains that a nation might enjoy by joining the common currency (for example, lower transaction costs) will be dwarfed by the economic damage that membership will bring. Nations that join the Eurozone in its present structure are effectively signing a death warrant. The speed of the death will be a direct function of how competitive they are in relation to Germany. There is no case to be made for Latvia or any other nation to enter a monetary system that is incapable of effective functioning. Major changes would need to be made to the basic design of the system for it to be viable. I sense that there is no will in Europe to make the necessary changes and the zone will continue its slide down into further malaise. Why would any nation want to join the Eurozone?

I am heading to the Land of Austerity today and so the blog will be relatively short. I was last in Europe this time last year and one of the vivid memories was the proliferation of for sale signs across the urban landscape. For sales signs even were in bountiful supply in well-to-do suburbs in Maastricht where I had never seen such things because the houses sell by word-of-mouth such is the attractiveness of the locations and it is “so not done to have common advertising awnings in your front garden”. But the houses stopped selling and pragmatics overcame their false dignity and the signs were multiplying. Things have become worse in the ensuing twelve months as the failed EU leadership has imposed one poor policy choice after another on their ailing economies. Anyway, for the next two weeks I will be reporting from various locations in Europe and beyond (UK). But for now a long flight awaits.