Until today, I thought that break-up of the Euro, or the European Union itself, would happen when pigs fly. Now I hear wings flapping.
With the Greek crisis, we see the chickens of the much-vaunted “European social model” coming home to roost. Greece was just like the other main-line Euro nations, only more so: ever expanding state hand-outs and subsidies, bureaucratized over-regulation in the supposed name of social solidarity gumming up labor markets and hobbling economic growth, unwillingness to pay the taxes necessary to prop up this shaky system, and hence running up unsustainable debt. (If any of this rings an American bell, it should.)
The music stopped when the Greek government woke up to find it could no longer borrow by selling bonds (except at eye-watering interest rates) – because bond investors had woken up to Greece’s inability to repay. So Prime Minister Papandreou said the days of wine and roses were over. And the people said, “No! We won’t stand for it!” They would accept neither cuts in government profligacy nor higher taxes. And so they went into the streets violently protesting.
For months, the other Europeans, mainly the French and Germans, tried to bail Greece out with new loans to help it pay its old loans. Though the thrifty Germans in particular resented that they, with an (early) retirement age of 65, should pay so spendthrift Greeks could retire at 57.
Greek public opinion blamed the mess not on themselves, but on the bond market, for its unwillingness to throw good money after bad, and upon the other European nations – Germany, in particular! – that were bailing them out! As thanks for their pains, Germans are now hated in Greece.
And, like so many other Europeans (the French especially), the Greeks also hate the free market, and the whole idea of business and commerce. They think it’s grubby, vulgar, and immoral. They think the wealth they want redistributed falls down from the sky; they don’t understand the concept that it must be earned before it can be distributed. (Does this ring any bells too?)
And the bailouts weren’t even enough to keep Greece solvent. So the next step was last week’s deal, allowing Greece to pay only 50% of what it owed. The suckers who had lent to Greece would be screwed. Did the Greeks appreciate this gift? No, they went back into the streets to protest – effectively, against paying any of their debt.
The 50% nonpayment deal, finally, appeared likely to actually solve the problem. And to this point Papandreou had seemed almost a hero, trying to do the right thing in spite of literally violent opposition. But now, suddenly, he has declared that the deal will go to a referendum — in a couple of months – prolonging the agonizing uncertainty, at a minumum. And Greeks would almost certainly vote against the deal. Papandreou’s referendum move is just stupendously irresponsible, and potentially sets in motion not only Greece’s national economic suicide — expulsion from the Euro and maybe the European Union – but possibly the destruction of both altogether – not to mention the whole world economy. (Italy, with a good slug of Greek debt, burlesque Berlusconi holding the reins, and wobbly even before this, could be the next and much bigger domino.)
Papandreou evidently pulled his referendum stunt to save the electoral prospects of his Pasok (socialist) party. Yes, even in this extreme Gotterdammerung situation, the jockeying for political advantage could not be put aside. One must ask, if this is the price Papandreou must pay to get re-elected, why would he want to keep his office and thereby preside over the resulting disaster? But meantime, Papandreou’s gambit has provoked an imminent parliamentary vote of no-confidence which, if it succeeds, will collapse his government, and going down with it, immediately, would be the recently agreed 50% deal – leaving Greece to just default willy-nilly on its debt – with the further consequences I’ve mentioned above.
What a horrorshow. And all because Greeks could not restrain their appetite for free lunches that of course, in the end, are never free.
I might have to change the name of this blog.