Athens: At the moment, Greece is still more complicated. And in order to work through that complication, we must take a brief and not completely welcome trip to France.
I am not one to lightly throw support to any government affixing a ‘conservative’ label to their affiliation. But as it usually does, a large portion of the European Left scares me as much as a large portion of the American Right. Many Europeans would have us believe that Nicolas Sarkozy was everything liberals hate, allegedly as bellicose and undiplomatic a leader as the world saw during his era. Yet there is not a single world leader in the last five years with his diplomatic accomplishments. Not even Barack Obama.
Sarkozy formed a bi-partisan government with Socialist leaders who trusted him enough to join his government in spite of being expelled from their own party. He supervised the negotiations the FARC group in Columbia that led to the release of a group of political hostages that included Ingrid Betancourt in exchange for the release of FARC’s leader: Rodrigo Granda. He negotiated the release of a group of Bulgarian nurses from Libya in exchange for providing greater aid to Libyans for health-care and immigration opportunities. And when Moamar Gaddafi threatened the same Libyan people to whom Sarkozy's France provided the aid Gaddafi wouldn't, Sarkozy formed a multi-national coalition to prevent Gaddafi's army from potentially committing a massive democide against the very people he ruled for over forty years. You don’t have to like Nicolas Sarkozy, or even support him as the lesser evil, but any subscriber to liberal values who is not a reactionary poseur has to acknowledge that he created an admirable list of diplomatic accomplishments which every world leader should try to emulate. In his place is Francois Hollande, a Socialist Party stalwart whose principle campaign promise in the midst of an economic maelstrom was to lower the retirement age.
What’s happening in France is just another version of events all around Southern Europe, in which a high standard of living is considered a guaranteed entitlement for which nobody needs to work too hard to sustain. The results of Greece’s recent election were inconclusive because most of the Greek voters cast their vote for whichever single-issue minority party best promised to uphold their particular special interest – is there any reason to expect that the June 17th election will be any better? Youth unemployment is now over 50 percent in both Greece and Spain and around 30% in Italy and Portugal.
Whether or not America averted another Great Depression in 2008-9, it’s very much a Great Depression in Southern Europe. The European Central Bank cannot possibly print up enough money to buy all its Southern members’ debt. This is a situation that practically cries out for populist demagogues to tell these countries that they can simply opt out of the euro zone (meaning whatever countries operate under the euro) with no repercussions.
So let’s do what they won't, let's walk through the repercussions of this action:
1. 1. Whoever opts out of the euro zone will have a currency valued so low as to be nearly worthless – and any worth it still has will quickly be washed out by hyperinflation.
2. 2. If a country pulls out of the euro zone, the Euro itself has potential to go into free fall twice over:
a. Any country who pulls out will do so with the express intention of defaulting on their loans - thereby saddling the European Central Bank and the European Union with a gaggle of junk bonds which that country would probably never have the money to pay back.
b. If one country pulls out of the Euro, so can any other – thereby terrifying worldwide investors in European companies who see a European investment as a guaranteed money loser.
3. 3. A Europe without a common currency would then be a union having neither a political nor a financial reason for existing. Russia, China, America, and the Middle East could practically dictate their own terms to a Europe in economic freefall. Any of the civil conflicts raging to Europe’s south could come up north, and there is no vested interest for the short-sighted politicians of any European country to involve itself in the problems of any other. Nobody knows where or how far the civil conflicts of the Middle East can spread.
There is, of course, one country which can still save Europe – but Germany simply doesn’t want to do it. They may have their house in order, but they’re no more willing to compromise their good lifestyle than Southern Europe was. Some figures say that this whole mess would be solved if Germany simply distributed 8% of its yearly GDP to Southern Europe – but no German wants to do that if they don’t have to. Once can certainly understand why they wouldn’t want to do it, but a Euro in free fall will ruin everybody’s party – even the Germans’.
There’s an even more practical solution which even (especially?) now few politicians are bold enough to suggest: A strong, unified, European Federation in which all countries have the same polity, the same legislators, the same army, and the same debts. But apparently it’s still too far fetched to imagine. Some policy makers suggested an intermediate baby step: the Eurobond – which pools together all European investments for a 10-year yield. If issued, it might be a convenient short-term solution. But even this baby step towards cooperation is so controversial that it may never appear on the market at all. As it always has been in Europe, national rivalries seem too bitter to ever overcome.