As Karl Marx was one of the earliest to point out, economics (though so much less interesting) is far more important than politics.

Marx considered all political events as epiphenomena. He viewed great men as blind instruments of irresistible forces which they themselves could hardly comprehend.

The Marxist vision of society has been disproved many times, always at epic human cost. However, his doctrine that productive forces propel history has stood the test of time – and is invaluable for an understanding of the current predicament of the European Union.

It elegantly explains why European Monetary Union was destined to fail. The state socialists and former communists who invented the euro never got to grips with this aspect of Marxist thought. Only Conservatives with an intelligent appreciation of economics and history – an enlightened congregation that included Margaret Thatcher, Oliver Letwin, Peter Lilley, Tim Congdon, John Redwood, Nicholas Ridley and Alan Walters – grasped that the EMU would collapse under the weight of its own contradictions, and that it was folly to construct a single currency before the political conditions were in place.

Meanwhile the European elite who advocated the euro (British representatives included Michael Heseltine, Peter Mandelson, Tony Blair, Ken Clarke, Nick Clegg and Danny Alexander, at the time only a cadet member of the European political class, so perhaps the chief secretary can be forgiven) ignored all warnings. Indeed, Lord Mandelson is still advocating British membership!

It is impossible to exaggerate the arrogance, the bone-headed stupidity and above all the brutality and callousness of these Europhiles. Their demented attempt to impose a new economic model on an unworkable political structure has already caused untold suffering. At the heart of their project is an audacious attempt to prove the primacy of politics over economics. Bear in mind that it is an experiment for which the European elite personally do not have to pay a price.

Their experiment has caused depression (not recession as inaccurately reported by pro-European journalists at the BBC and elsewhere) across much of Europe.

This is getting worse. The Italian economy is moribund, social cohesion has vanished and Italians are starting to turn venomously on immigrants. The Greek economy has shrunk by 30 per cent, and one quarter of the population is out of work. Youth unemployment in Spain stands at an unspeakable 50 per cent.

We are talking about tens of millions of ruined lives, and busted dreams. This reality has already brought about a convulsion in Europe. Entirely new political parties have emerged, from the far-Left and far-Right, brought into existence by a common scream of despair against a broken system.

For the time being, the former political class remains in charge. It has as much legitimacy as the ancien regime in pre-revolutionary France, with the same moral bankruptcy, calculating venality and profound sense of entitlement. This elite has the same distaste for democracy as 18th-century lords, and over the long term the same chances of survival. In its dying convulsions, Jean-Claude Juncker’s political class has abolished democracy. Italy has had three consecutive unelected prime ministers since Silvio Berlusconi’s scepticism about the euro caused the EU elite to recruit an unscrupulous cabal of bankers to remove him (former US Treasury Secretary Tim Geithner gives a gripping account of this unwholesome manoeuvre in his recent memoir).

David Fuller's view

Here is a PDF version of the article.

I left this article out for Mrs Fuller to read after I first saw it two days ago.  I then asked her what she thought of it.  She said she only read half of it because it was too depressing.  Yes, it is depressing, although it ends on a far more optimistic note.

However, I am not at all convinced that the formation of a new state with Germany at its centre is sensible or viable.  Has Europe not flirted with that, albeit a larger potential state, for long enough via the EU?  Any two-tiered system of insiders and outsiders sounds antagonistic to me. 

What I have always believed in and still hope for eventually is a European Free Trade Area, which is what we were initially and misleadingly promised.  This should be without any requirement to join the Euro, let alone run by a regional and unelected government.  It would be far less antagonistic than what we have today.  It would also be far more democratic.  Let each country be responsible for its own policies.  All Europeans would then be free to enjoy the many cultural, geographic, and economic qualities for which this Continent has long been known.   

Coming back to today’s harsh European realities, we should soon know for how much longer the current EU can masochistically and sadistically limp along, before countries vote to drop out, perhaps commencing with Greece.  We will also see how much longer the pragmatic ECB President Mario Draghi can hold the EU together.  He can only do this with monetary policy which is not enough for a long-term solution to the EU’s serial economic problems.  Moreover, the ECB’s Governing Council may block Draghi’s efforts to proceed with QE at its 22nd January meeting.   

If so, I would not be surprised to see Mario Draghi resign, which would strengthen Germany’s hand.  However, if his opponents led by Germany’s representatives back down, the ECB will do all it can to halt the EU’s slide into deflation.  This may not work but it would give the EU more time to address its economic problems. 

What about European stock markets?  Uncertainty and the current economic problems remain a drag on performance.  Nevertheless, Europe’s Autonomies, such as Germany’s world class automobile sector – BMW (BMW GY) est p/e 9.73 yield 2.96%, Daimler (DAI GY) est p/e 10.29 yield 3.38%, Volkswagen (VOW3 GY) est p/e 8.21 yield 2.24% VOW3 GY) – are very competitively priced.  If the Euro broke up or the EU fragmented, share price volatility would provide a further buying opportunity before these three car manufacturers move from discounts to premiums relative to the global competition which is generally of lesser quality.