by system failure
The UK withdrawal process from the EU has officially started with the letter sent by the British PM, Theresa May, to the European Council president, Donald Tusk. It has been estimated already (rather reasonably), that the two-year period until the final completion of Brexit is quite a short time, which means that much more time will be needed for all the issues to be resolved between the two parts.
As the developments in Europe and globally change rapidly, we can think at least two cataclysmic events that may occur before the final “divorce” between the UK and the EU, that may overshadow Brexit, and lead Europe to an even more uncertain path compared to the one that has already entered.
The most immediate, big event, is the oncoming French presidential election, which will determine to a great extent the fate of the eurozone and perhaps the European Union.
All the recent polls show a tight battle between Marine Le Pen and Emmanuel Macron. They will be probably the two candidates that will make it to the final round. According to the newstatesman , “Marine Le Pen, the anti-EU leader of the populist National Front, is gaining ground. For the first time, the far-right could win France – no one can predict the outcome of this election.”
In case that the far-right will take over France, we should expect rapid developments towards the breakup of the European Union. Le Pen promised that she will take France out of the European Union and even NATO. While the UK was anyway a "distant player" inside the EU, France resides in the hard-core of the Union being also member of the eurozone. The Germans have bet heavily on the cooperation with France and invested for years on the Franco-German axis, in order to dominate progressively and silently in the continent through the monetary union.
As described in previous article, while Brexit may be even convenient for Germany's plans to establish permanently its domination in Europe, a possible Frexit may lead to the opposite results: “Currently, the French political establishment follows Germany to the letter. That's because both the German and the French political establishment serve the big European capital through the neoliberal doctrine. It had become quite obvious especially when they sacrificed Greece to save the German and the French banks. However, things are changing rapidly in Europe. It seems that the political parties, i.e. the Social Democrats and the Popular RIght, that dominated the European political scene for, at least the last forty years, are collapsing. Therefore, things can go wrong for Germany also with the potential rise of Marine Le Pen in power. Recall that, recently, Le Pen stated that she will take France out not only from NATO, but also from the EU.”
The loss of France will leave a huge gap between the north and the south of the EU. France was playing the connective factor (even superficially) between the hard-core and the periphery of the eurozone. A possible Frexit will accelerate the instability inside the eurozone and the EU, leading to an ugly breakup of the Union quite faster than the final Brexit. Under such a big disaster, Brexit may even seem to be pointless.
The breakup of the eurozone
Eurocrats are trying to hide the big problems of eurozone instead of dealing straight with them. As their first priority is to retain a failed neoliberal model of austerity, deregulation and privatization at the expense of the European people, they pretend that there is no need for a different path. And this illusion continues despite the additional problems from the refugee crisis, as well as the rapid rise of the nationalists and the far-right throughout Europe.
There are at least three dangerous situations that may lead to the breakup of the eurozone, even before the final Brexit.
The first one has to do with the Italian banking system which seems that is facing huge problems and is being kept in life thanks to Draghi and his large liquidity injections through the ECB. Italy has to deal also with a big national debt. However, the policies dictated by Brussels and Berlin continue to suffocate the European south. They prefer to retain the recipe of destruction instead of changing these policies towards real growth that could boost the economy. Through cash injections, they pretend that the Italian problem is about to be fixed, yet the danger of a sudden banking burst of the Italian banking system could blow up the whole eurozone, any moment.
The second one involves the banking mega-monster called Deutsche Bank. The largest bank in Germany, is significantly exposed, holding dubious financial products known as "derivatives", worth 67 trillion euros, in 2015. This amount is similar to the GDP of the entire world and 20 times greater than the GDP of Germany. Any comparison with the situation of the bank Lehman Brothers in 2008 would not be irrelevant. Just when Lehman Brothers went bankrupt, had available derivatives of only 31.5 trillion. The crisis of 2008 confirmed the concise definition of derivatives as proposed by the American tycoon Warren Buffet: "financial weapons of mass destruction."
While Angela Merkel sacrificed Greece to save Deutsche Bank and the other Franco-German banks, this time has no excuses. She has run out of scapegoats in case that the German banking monster will need another huge bailout to avoid collapse.
Yet, Merkel may not have to deal with the mess that she and her minister of finance have created. As they may lose in the oncoming German election, they will deliver the Deutsche Bank huge timebomb to the hands of the next government.
The third dangerous situation that may blow up eurozone, is the refueling of the Grexit discussion. It seems that Greece's creditors have stuck in a dead-end situation because they have absolutely nothing positive to exhibit concerning the Greek "program". Greece is sinking deeper in debt, unemployment remains in unprecedented high levels, and there are no signs of recovery in the close future.
The Greek society is literally exhausted from the brutal austerity imposed by the neoliberal priesthood and the possibility of Grexit starts to mature in the minds of Greeks. Creditors seem to ignore the danger of the situation and ask for more brutal measures, believing that the Greeks will "obey" forever. Yet, more and more Greeks start to find Grexit as a solution, not as a disaster, as they already experience the disaster inside the monetary prison of the common currency.
According to some recent information, a secret ECB study estimated that Grexit would cost more than 1.5 trillion euros! Greece's creditors play with fire and in the case of an uncontrolled Grexit, the financial Tsunami will make Brexit irrelevant.