My friend Greg emails to offer some interesting thoughts on the current economic crisis gripping Europe. The proximate cause of the crisis is the terrible state of the Greek economy which will need to be bailed out by its partners in the European Union, but who is up to the task?
Greg writes that:
Americans don't seem to understand the variety of epic implications this European crisis has. A few years ago I studied abroad in Athens, and ever since then I've followed Greek politics with interest, silently hoping their fiscal irresponsibility would catch up with them. Now it finally has, and in a big way. The situation can be viewed from a number of different angles. For my own part, I'd like to propose three.
The Greek Model: For fiscal conservatives, Greece is the poster-child for everything wrong in the world. One out of three Greek jobs is in civil service, and such jobs are akin to being a tenured professor in the US - great pay, lifetime state benefits, total job security. When I lived in Greece, it was obvious that "hard work" was a dirty phrase. From noon until 2pm every day - the heart of the working day - Greeks take a siesta to nap and relax. Banks close, shops shut down. Citizens expect the state to take care of their every whim, including full college tuition for every student. For decades they spent with abandon but refused to pay enough in taxes to cover their debts. Now, the joyride is over and the Greek government can no longer cover their debt. Why aren't American conservatives trumpeting this parable at every possible moment?
California: Maybe Greece is too far away for Americans to care about - California is closer to home. Like Greece, California has the worst credit rating of any US state and the largest deficit. For decades they spent money on social services and world-class education but refused to pay the taxes necessary to support their desires. Now, the joyride is over and they're broke, out begging hat-in-hand for the rest of the country to bail them out. And like the European Union, Washington DC will be forced to intervene, because we share a common currency. Letting California reap what they deserve - bankruptcy - is not an option since it devalues our shared dollar. The Europeans are facing the same dilemma with Greece.
The Germans Finally Conquer Europe: By far the most interesting angle to me, is this one. Germany is the only economy with enough gas in the tank to bail out Greece, but German voters don't want to send their taxpayer money to bail out the bumbling Greeks. Makes sense. I can sympathize. So in order to sell the bailout to their citizens, Berlin has to attach lots of strings and preconditions to the money so it doesn't look like a blank check. But now, countries like France are examining the strings and realizing that if Germany takes the reins, Berlin will be in dominant control of the European Central Bank. And who could blame the Germans for wanting such control, since it's their money in the first place? Economists expect Italy and Spain may soon need a German bailout as well. That leads to more German preconditions and more control over the European Central Bank. What irony. After two world wars, the Germans will finally be in control of Europe - not by force of arms, but because of the Euro.
These are the three angles I find most compelling as an American, but there are plenty of other consequences for the Europeans. Will the Euro experiment fail altogether if Germany doesn't bail out Greece? Is the refusal to bail them out even an option? Will German bailouts result in greater political integration of the EU, or will it drive them further apart? So many questions, but seemingly, so little curiosity from Americans.
Fascinating analysis, Greg. Either Germany becomes an economic hegemon or the Euro collapses and Europe is plunged into economic chaos (which may also result in Germany becoming an economic hegemon). I wonder if the big spenders in our own government are paying attention to the lessons European socialism is offering us.RLC