French Debt Signals Euro Crisis

French Debt Signals Euro Crisis

This year’s recipient of the Emperor Charles V Award is calling for a fundamental transformation of Europe.

Global debt has not been this bad since the Napoleonic Wars. Collectively, the world’s 195 nation-states owe close to 100 percent of global gross domestic product in debt. And several of these have already passed this tipping point.

As a whole, the eurozone’s debt-to-gdp ratio is considerably lower than the United States’ debt-to-gdp ratio; but high debt levels in France are causing many to worry about a European sovereign debt crisis. France is in debt to the tune of around $3.2 trillion. That is more than 110 percent of the nation’s gross gdp. Yet Paris continues to rack up huge deficits.

On June 10, the spread between French and German 10-year government bonds widened to its biggest span since 2011, the start of the Greek sovereign debt crisis. This was largely due to big gains by Marine Le Pen’s National Rally in European elections. This ultranationalist party has pledged to lower France’s retirement age, erect barriers to imports, and start handing out lavish government subsidies. Yet all these moves would further increase France’s national debt, so investors are demanding high interest rates on risky French bonds in case France goes bankrupt.

The European Central Bank (ecb) has reprimanded Belgium, France, Hungary, Italy, Malta, Poland and Slovakia for breaching the European Union’s budget rules prohibiting member states from running deficits beyond 3 percent of gdp. But roughly a quarter of Frances’s electorate wants to leave the eurozone. So it is not too concerned about the consequences of breaking EU regulations by astronomically running up the national debt.

Yet while the National Rally is unconcerned, European elites are definitely worried. Former ecb President Mario Draghi was able to save the euro from the 2011 sovereign debt crisis with a $524 billion bailout. But $524 billion does not go very far toward bailing out an economy that is $3.2 trillion in debt. The French economy is nearly 13 times the size of the Greek economy. Therefore, eurocrats will need different solutions for a French crisis.

Upon receiving the Emperor Charles V Award at the historic monastery of Yuste, Spain, on June 14, Draghi told his audience that solving Europe’s economic woes will require “a redefining of our union that is no less ambitious than what the founding fathers did 70 years ago with the creation of the European Coal and Steel Community.”

The European Coal and Steel Community transformed Europe into a giant free-trade zone and laid the foundation for the Economic and Monetary Union of the European Union. Yet free trade, a standardized interest rate and a common currency don’t stop the French from spending too much. That is why Draghi is calling for fundamental transformation.

In an interview with the Economist, Draghi called on the eurozone to merge into a fiscal union. “More federalist policies are the only way to make the union a respectable political and economic powerhouse in today’s complex geopolitical realities,” he said. “Without action, there is a serious risk that Europe underdelivers on its climate goals, fails to provide security its citizens demand, and loses its industrial base to regions that impose fewer constraints on themselves.”

In other words, it is not enough for the European Central Bank to set interest rates. The EU needs the authority to control both the taxation policies and the spending policies of its member states. Americans usually don’t complain about Texas bailing out Louisiana because both Texas and Louisiana are members of a fiscal union that passes a federal budget each and every year. The eurozone must develop a similar system if it is going to hold together long term.

The Trumpet has noted for years that the euro was designed from its inception to fail. Good economists know you cannot have a stable monetary union without a centralized body making decisions about the collection and expenditure of taxes. The euro will never be stable until the nations within the eurozone surrender their independence to a federal government in the same way states in the United States surrendered to Washington, D.C. Euroskeptic movements like France’s National Rally and Germany’s Alternative für Deutschland want to stop this from happening, but Bible prophecy indicates their attempts to sabotage European unity will ultimately fail as global economic conditions worsen.

For more than 75 years, the Trumpet and our predecessor, the Plain Truth, founded by the late Herbert W. Armstrong, have predicted that the European Union will be pared down to 10 members who surrender their military might to a pan-European leader playing the role of a modern-day Caesar. Brexit was the beginning of this paring down process, but European leaders like Mario Draghi are realizing the EU needs fewer members if it wants to rule the world.

This bold prediction is based on Revelation 17:12-13: “And the ten horns which thou sawest are ten kings, which have received no kingdom as yet; but receive power as kings one hour with the beast. These have one mind, and shall give their power and strength unto the beast.” As a core member of the historic Holy Roman Empire, France will undoubtedly be one of the 10 nations that surrender its economic and military might to the beast power. Therefore, we can expect French leaders to start taking Draghi’s economic proposals very seriously as their debt rises.

One of French President Emmanuel Macron’s closest allies has already stated that France wants a top job in Brussels for Draghi, so keep watching European politics for some dramatic shakeups in the months ahead.

To learn more, read “The Greatest Heist of All Time.”