As I watch the European financial crisis unfold (to say nothing of the global financial crisis), I am struck by just how blind many of Europe’s leaders are. Consider what is happening as they met in Davos this past week: From the Irish Times: “Mr [Olli] Rehn also delivered an upbeat assessment of debt restructuring talks in Athens, saying a deal with Greek creditor banks was likely in the coming days.” And “Cheerfully ignoring the dissent, Mr Rehn said that he was confident that a bailout boost through the International Monetary Fund could be agreed soon.” According to Bloomberg, George Osborne, UK Chancellor of the Exchequer said “The fact we’re still at the beginning of 2012 talking about Greece is a sign this problem hasn’t been dealt with.” Well, duh. And I promise you: we’ll still be talking and writing about it one year from now.
Mr. Rehn, and others like him, also cheerfully ignores the past and history, as well as the role that culture plays in people’s habits and lives. As we remember from the late professor of political science and history Samuel Huntington in his seminal work, The Clash of Civilizations, culture trumps economics. In other words, an individual’s identity is wrapped up in his culture, not his livelihood. Put another way, what is more important: that a man identifies as Greek or that he works in a shipyard? He is Greek first and as such, the Greek culture has evolved into certain expectations: that the EU and the state will take care of their economic needs (“rights” as they believe) from the time they are born to the time they die. The Greeks believe that these are “rights” and that they are owed to them (Hardly surprising when you recall that the UN’s Declaration of Human Rights states in Article 24 that “Everyone has the right to rest and leisure, including…periodic holidays with pay.” Bollocks). The Greeks – like so many EU citizens, have come to expect entitlements from the EU, the state and their fellow EU citizens. And Rehn thinks he can change this? I wish him good luck. However, there is no such thing as luck.
And so the EU nannies continue to be blind, willfully or otherwise. This blindness will sink Europe.
Meanwhile, it has emerged – once again – that Germany is actively attempting to strip Greece of many of its decision making powers (I would allow myself one delicious moment to think that the Germans could be successful but then if it can apply to one, it can apply to others: and that is a very bad idea). According to the UK’s Independent, “The proposal was made by Germany as the euro group considered how extra finance should be offered to countries such as Greece which need support but are ‘continuously off-track’ with their budgets.” One of the proposals made by the Germans at Davos was that the Greeks – in order to receive even more EU taxpayer money – must commit to what is called “absolute priority to debt service.” What this means is that the Greeks must enshrine in law through parliament that first, any revenues the Greek government collects through taxation would be used, first, to service its debt. Then it could use any money left over for everything else a government pays for – social services, defense, education, etc. This is astonishing. It means that if a series of earthquakes struck Greece and caused widespread devastation, the Greek government would still have to service its debt first, and then provide for its citizens. The Greek response should come as no surprise and I’ll be writing about this next week.
Fortunately, there are those who are not blind. Consider Dr. Nouriel Roubini, known as “Dr. Doom” and with reason: the New York University economist predicted the current global financial crisis long before it happened. Here is Bloomberg on Dr. Doom: “The euro zone is a slow-motion train wreck,” Roubini said in a panel discussion in Davos, Switzerland today. “Not only Greece, other countries as well are insolvent.” Roubini said he sees a severe recession in Europe and a 50 percent probability “that over the next three to five years the euro zone will break up. Not all the members are able to stay. Greece and maybe Portugal may exit the euro zone -- Greece within the next 12 months. Portugal may take a while longer.”
Last weekend I spoke with a friend of mine in the Ministry of Foreign Affairs of an Eastern European nation now in the EU. In 2004, when his nation joined the EU, he told me “Well, we’ve now traded one master for another.” This past weekend when we were talking about the possibility of Greece leaving the EU, he told me “It’s very much like the Soviet Union: you cannot leave, they won’t let you.” If that is what the EU has come to, it is worth considering: should you really join in the first place?