This past week saw dramatic events take place to rescue the Eurozone, and along with it the world economy, from imminent collapse. In a very real sense we are back to the dark days of 2008 when the world economy teetered on the brink of apocalypse. Matters are extremely serious and will remain so for some time.
In the past couple of days the United States Federal Reserve (The Fed) coordinated plans together with other central banks of the UK, Japan, Canada, Switzerland and the European Central Bank (ECB) to restore liquidity to the world’s financial markets and make available a flood of cheap US dollars. This amounts to a blood transfusion for a patient who has suffered a heart attack: the blood stopped flowing and death was imminent. In financial terms the flow of money through Europe’s financial system had ground to a halt and needed the most urgent transfusion to get it flowing again. The impact for now has been positive. Money is flowing again. Stock markets have risen dramatically and the markets have temporarily calmed down. But this does nothing to cure the patient. The heart (for which read the Eurozone crisis) is still terminally sick. Olie Rehn, the EU’s Finance Commissioner, said the EU has a little over a week to sort out its problems. Failing such urgent and concerted action, the Eurozone risks imminent collapse and a disorderly default that would spread like a contagion throughout the global economic system. Britain would be badly affected and the interlocked and interdependent nature of the world’s financial system would be shaken to the core.
The intervention by the central banks thus marks “a defining moment” in what is an ongoing crisis. The German Chancellor, Angela Merkel, has called this moment the start of “a new phase in European integration”. What can we expect in the coming few weeks? Germany and France will lead the charge to urgently amend the EU treaties to allow for greater fiscal union and harmonisation between members of the Eurozone; provision will be made for nations to leave the eurozone if their presence becomes too toxic; provisions must be found for Europe to finance the debts of fellow eurozone members.
For now, it is difficult to see how the eurozone can stay together in its current form, such are the large national disparities and volume of debt involved. What’s more, the EU moves at a snail’s pace yet the markets can act and react like lightning. Whatever happens, Germany is now calling the shots and any outcome will be moulded by Germany’s national interest. The eurozone countries will do their best to avoid a disorderly default, though the risk of default is likely to remain high for some time. The Bank of England Governor, Mervyn King sent out grave warning signals of a eurozone collapse on Thursday.
Is this the defining moment when we shall see the beginnings of a major realignment of nations in Europe, paving the way for the fulfilment of prophecy and the rise of the final ten-nation union mentioned in Scripture. Quite possibly. The time seems right. Watching all these events unfurl over the coming weeks and months ought to be spectacular, to say the least.