While much of the focus in 2013 has been on the global currency wars, China's rapid climb to second place in international finance, and a global disconnect from the dollar and America's economic supremacy, underneath it all may be the black swan which signifies the final days of the European Union, and the end to their experiment of a singular continental currency.
On Dec. 20, Standard & Poor's rating agency downgraded the EU's AAA rating, and issued warnings that nations such as the UK may begin to pull their monetary support of the EU as it fails to agree on a new budget.
The European Union was stripped of its AAA credit rating by the Standard & Poor’s agency on Friday as the 28-state block struggles to deal with the debt problems afflicting a number of its members and internal conflict over its budget.
S&P made the announcement just as EU leaders were holding a summit marking a big political step forward with an agreement on a banking union intended eventually to ring-fence failing banks from bringing down an entire economy as happened in Ireland.
"In our view, EU budgetary negotiations have become more contentious signaling what we consider to be rising risks to the support of the EU from some member states,” said S&P in explaining its downgrade decision. - France 24
Yesterday's downgrade and warning comes less than three weeks after the EU finalized a new agreement to deal with future crises during their 'The Future of Banking in Europe' conference. In this agreement, finance ministers around the Eurozone confirmed that bank depositors would make up the lion's share of capital to bail out insolvent banks, and that the ECB and European powers would limit themselves as the backstop for EU nations in need of borrowing and loans.
Additionally, Eurozone nations are already beginning to forge individual agreements with China and other BRICs nations to move away from the petro-dollar and U.S. control over international finance.
The list of the 23 countries which are creating new swap lines outside of the dollar include China, Russia, India, and surprisingly, Germany, France, and the United Kingdom. This means that the Eurozone itself is abandoning the dollar, and preparing for transition to a new central banking system. - Examiner
Between 2008 and 2010 the U.S. Federal Reserve secretly funneled trillions of dollars to the ECB and Eurozone to bail them out during two credit and liquidity crises. Additionally, in 2012 the ECB became officially insolvent as they had more liabilities on their books than assets to support them, and straining their ability to deal with the ongoing debt crises occurring in Greece, Spain, Portugal, and Italy. By 2013, this insolvency manifested in the unprecedented actions of confiscating customer deposits in Cyprus, and using them to fund a bank 'bail-in' which will now be the new policy for European insolvencies.
The result of S&P's downgrade will quickly manifest itself into greater costs to borrow money, not only for the ECB, but for any bank tied to the Eurozone. Yet behind the scenes, relatively solvent nations such as Germany and the UK are already making preparations for a new global financial system, and the final days of the Euro and Eurozone could literally be only one more crisis away.