June 27, 2016
Norbert Röttgen, the chairman of the committee on foreign affairs of the German Bundestag writes: “Given the range of challenges the EU faces with Libya, Syria, Russia, the euro, youth unemployment and the refugee crisis, the most urgent and profound danger for the EU is not economic or geopolitical: it is psychological” “Let Germany put broken Europe back together” June 28.
But in his prescribed ways forward he, as basically all experts have been doing, ignores how Basel Committee’s risk-weighted capital requirements have blocked banks from financing the riskier future and kept them busy just refinancing a safer past. Banks not daring to explore risky bays, is no way for Europe to solve anything. That just guarantees Europe will finish suffocating, gasping for oxygen, in some dangerously overpopulated safe havens.
Nothing has done so much damage to the Eurozone as these regulations. For instance, without the ridicule low capital requirements applied when lending to sovereigns, Greece would never ever have been able to accumulate so much debt.
PS. And when Röttgen writes “Europe is a different place now the British have voted to leave. It is up to the rest of us to determine what type of Europe it will be.” I do find it somewhat hard to agree. First Britain is leaving the European Union not Europe. And then why should EU want to be a different Europa, just based on if Britain is in or out?