FACTDROP

According to his opinion "the single currency project would be used to generate an irresistible momentum for full scale political union in Europe, dominated by an implicit power-sharing agreement between the German and French political elites. This was a political project which had to be pursued by stealth because neither the peoples nor the parliaments of major European nations had ever been willing to support it when it was presented openly as an explicit aim". 

Back in 2001 the European Court of Justice ruled that the European Union can lawfully suppress political criticism of its institutions and of leading figures, sweeping aside English Common Law and 50 years of European precedents on civil liberties. In this framework found that the European Commission was entitled to sack Bernard Connolly, for his book.

The ruling stated that the commission could restrict dissent in order to "protect the rights of others" and punish individuals who "damaged the institution's image and reputation". The case has wider implications for free speech that could extend to EU citizens who do not work for the Brussels bureaucracy. The court called the Connolly book "aggressive, derogatory and insulting", taking particular umbrage at the author's suggestion that Economic and Monetary Union was a threat to democracy, freedom and "ultimately peace".

By that time the advocate - general Damaso Ruiz-Jarabo Colomer implied (unsuccessfully) that Mr Connolly's criticism of the EU was akin to extreme blasphemy, and therefore not protected speech.

Well, now that it is evident that the real threat to democracy and ultimate peace cannot be a book but rather the unregulated banking system of the EU I find it appropriate to quote a small fraction of his prophetic criticism from the "Dark Vision for the World Economy" :

"Within EMU, Ireland, Portugal and Finland have all gone through the up phase of a cycle generated by a discrepancy between the anticipated rate of return on capital and the ex antereal rate of interest. They are now clearly in the down phase of that cycle. In Ireland's case, the boom was so fierce that cock-eyed optimists can contemplate a sharp fall in the growth rate as perfectly absorbable. But in none of these countries -- with Greece to follow rather soon -- will the process end with a nice, smooth return to a "sustainable" long-run growth rate.

All of them will face depression, deflation and potential default. Public sector financial positions in all ofthem will deteriorate with amazing speed (in the "peripheral Europe" boom-bust cycle a decade ago, for instance, government borrowing as a percentage of GDP increased in several countries by more than a dozen percentage points of GDP in just three or four years), yet all of them begin with public sector debt ratios higher than was Argentina's at the beginning of its recession. And the accession countries will assuredly follow a similar path when they join EMU.

Can the EU stand idly by and watch this happen? At first, yes. The ECB will claim that individualcountry developments are not its concern. And the EU as whole may argue that the countries concerned knew the rules, including the budgetary rules of the so-called Stability Pact: theyhave made their own beds, now they must lie on them. But that attitude cannot possibly persist. For however small these countries may be, financial markets will be aghast once the full horrorof the slump, and it sociopolitical implications, becomes apparent. Ultimately, the ECB will beforced to behave as if it were the central bank of the small countries, easing monetary conditions massively depreciating the euro to keep the small countries afloat -- at the expenseof inflation elsewhere in the area -- until a "political" solution can be arranged.

What the politicians will decide will be to change the rules that currently prohibit EU bailouts of individual member countries. Bailouts will be instituted in return for the forced signature of the smaller countries on a new treaty which will extinguish what remains of national political independence in Europe.

The progenitors of EMU knew exactly what they were doing. Thus Jacques Delors,for instance, said in 1995 that, "Monetary union means [our emphasis] that the Union acknowledges the debts of the member states of the monetary union". The syntax is contorted, but the logic is clear: the "no bailout" provisions in the original EMU setup were a sham,designed merely to reassure the German public, which had always intuitively tended to believe that a monetary union without a political union must become a debt union".