Greece Not Out of the Woods

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In the election billed as a make-or-break moment for the European Union, the pro-bailout faction in Greece has carried the day. Antonis Samaras and the conservative, pro-bailout New Democracy party have won 30.1 percent of the vote, giving them 130 of the 300 seats in the Greek Parliament. The anti-bailout Syriza party led by Alexis Tsipras won 26.5 percent and 70 seats, and the pro-bailout Socialist PASOK party, led by Evangelos Venizelos, ran third with 12.6 percent of the vote and 34 seats. “The Greek people today voted for Greece to remain on its European path and in the eurozone,”  said New Democracy leader Antonis Samaras. “(Voters chose) policies that will bring jobs, growth, justice and security.”

Will they? Barring major changes in the way Greece conducts its affairs, the answer is no. The latest bailout of $218.6 billion, courtesy of the European Union and the International Monetary Fund (IMF), will do little more than forestall the inevitable in a country beset by five years of recession, 22 percent unemployment, and thousands of private sector businesses shutting down. And even as Mr. Samaras vows to maintain the austerity measures necessary to keep the funds flowing, he promises to seek a better deal than the one currently in place. This is due in large part to more lenient terms won by Spain’s insolvent banks when they received their very own $125 billion bailout only last week.

In other words, Greece is little more than a symbol of the far larger disease that afflicts the European Union. That disease can be reduced to a simple phrase: socialist-inspired hubris. It is a hubris so deep and overwhelming that common sense cannot compete with it. There is no other way to describe a union that was created, based on two fundamentally flawed ideas, namely that industriousness and slackness are inconsequential, and that bureaucracy supersedes culture.

The idiocy of the first idea can be reduced to a simple concept. Every other consideration notwithstanding, there is finite limit on how far nose-to-the-grindstone Germans, who retire at 67 years of age, will go to underwrite devil-may-care Greeks, who retire at 61. That is not to say that Germans will immediately abandon the Greeks, as Peter Tchir, with TF Market Advisors explains. “Now that Germany and others started looking at how to manage a Greek exit, they have realized some scenarios are pretty disastrous and will go out of their way now to avoid those. There is just too much risk–that it quickly spreads to Spain and Italy, especially if the ECB (European Central Bank) has to take massive write-downs,” he contended.

The idiocy of the second idea is just as damaging. The original vision behind the creation of the EU was a “United States of Europe” that would mitigate the conditions that produced two World Wars. Yet while America is comprised of fifty separate states under a federal umbrella, every one of those states is American, culturally speaking. The EU on the other hand, is a conglomeration of sovereign nations, each with its own cultural imperatives and, as Germany and Greece illustrate so vividly, markedly different visions of both entitlement and fiscal responsibility.

Where Europe got it spectacularly wrong was setting up a common currency without first setting up a political union. Thus, the bailout conditions imposed on Greece by the EU, the European Central Bank and the IMF that many Greeks see as overly onerous to begin with, are further exacerbated by the reality that those same Greeks view such “austerity” as an assault on their national sovereignty. British writer Nigel Gardiner of The Telegraph illuminates the current consequences of this cart-before-the-horse approach, within the context of last week’s announcement by European Commission President Jose Manuel Barroso that the EU must take “a very deep step” towards further integration:

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  • JasonPappas

    Excellent summary. Let's add:

    1) There is no real "austerity" if by that word one means reduction in the bloated public sector. After a decade of expanding government expenditures, profligate southern European countries only made token givebacks. Read Veronique de Rugy.

    2) Most deficit reduction was achieved by massive tax increases which has caused a "private austerity" and helped deepen the economic downturn.

    3) Labor regulations prevent wages from falling to equilibrium levels creating unemployment and make southern nations uncompetitive. Business regulations discourage investment.

    4) Greece can't survive in the Eurozone and can't change its ways. The EU is just buying time to fix other problems then it will let Greece go under.

    5) The left is trying to manipulate Germany via WWII guilt but after absorbing East Germany (a much bigger cultural change) the Germans expect southern Europeans to lose their Commie ways, too. Ain't going to happen.

    6) Spain is the big problem now.

  • Sooke

    'Labor regulations prevent wages from falling to equilibrium levels creating unemployment and make southern nations uncompetitive."


    Spain has a youth unemployment rate of 50%.

    Yet, this insanity could be solved immediately by eliminating the minimum wage.

    Unemployment would disappear as wages fell until supply met demand. Tax revenue would rise and crime would fall. These young people need jobs, any jobs, at any wage to regain their self esteem.

    Singapore has no minimum wage, no unemployment, and a per capita GDP of $62,000.

    The answer is simple. All it will take are some politicians who are willing to fight the tyranny of the status quo.

    • guest

      And a HUGE ISLAMIC youth problem. Someone has to pay for them not to work! The Arab spring
      is going to be very expensive in health care, police, and courts. Who will deal with that?

  • ApolloSpeaks

    Don't get your hopes up that yesterday's election in deadbeat Greece will fix or change anything. Greece is broke and broken wanting the EU to bail it out after first lying its way into the Union then living beyond its means and spending itself into ruin. And Germany, understandably, will not do so without painfully stringent austerity measures to cut things to the bone (or cut into it) which Greeks are reluctant to do after partying like reckless teenagers for years.


    • ApolloSpeaks

      The Greeks want the party to go on (like Democrats here at home) with the EU footing the bill-because decades of screwball socialist indoctrination taught them that they're entitled to it. The good life is there's by divine right, and the great God of Government is obliged to provide it. If not the Greek government then Germany and others. For hard working Germany that's earned all of its wealth to cave in would be a MORAL HAZARD with country after country (Spain, Portugal, Ireland, Italy etc.) wanting an entitlement bailout too, thus creating a monstrous black hole sucking all of Europe into oblivion. What is the solution and salvation for Greece? Living like the monks on Mt. Athos.

      Click my name to continue reading article.

  • tagalog

    Enterprises that are "too big to fail" are, by definition, monopolies or trusts. They MUST be made to fail (go into bankruptcy and either go out of business or reorganiize to become more streamlined) because their size makes it impossible for competition to work properly in determining supply and demand. Without supply and demand operating according to human (i.e., market) forces, the value of things can't be determined. Without knowledge of the value of things, it is impossible to charge reasonable prices for goods and services. Without reasonable prices set by market forces, economic systems collapse. That is pretty close to being a law of nature.

    So Greece will fail, the European Union will fail, both will collapse, and that collapse may be worldwide.

    In the long term, the collapses will be a good thing; in the short term it will be horrible, worse than the Great Depression. We can only pray to God that He keeps us from slipping into totalitarianism during the bad years.

  • crypticguise

    Every day we read one more DELAY in the IMPLOSION of Greece, the Euro and the European Union (an oxymoron). There has never been a Nation of Europe.

    We all KNOW that Greece is bankrupt and will default on its debt. Why, oh why do these European Poiticians continue to suck the last remaining Euro from Germany? Oh… because they can.

  • Snorbak

    Economisits (supposedly) often astound me, if you have a liquiditity problem, you can fix it by borrowing money. When you have a solvency problem you dont fix it by going deeper into debt…..idiots.