Monday, 27 June 2011
Just imagine if the countries of North and South America joined together in a more perfect union. I give you the American Union, the AU. This borderless combination, allowing for a free exchange of peoples and goods, is based on a unified currency, let’s call it the Americo.
Now if you further imagine that this currency has the same exchange value right across the AU, that it is no different in, say, Guatemala or Bolivia than it is in the USA or Canada. Now imagine a central bank with low interest rates; imagine no detailed auditing of national borrowing and finance; imagine governments living on credit, endlessly beyond their means. Imagine American tax payers working until they are seventy to ensure that Guatemalans can retire at fifty. Do you think this is a nightmare? Well, then look across the Atlantic to see it in reality, look not at my chimera but at the real life European Union.
Greece is on the verge of bankruptcy, on the verge of defaulting on what is called sovereign debt, the liabilities falling to the state. The euro, the currency of a good bit of the European Union (not Britain, thankfully) is on the verge of collapse. President Nicholas Sarkozy of France is in a mood of high anxiety:
Without the euro, there is no Europe, and without Europe there is no possibility of peace and stability.
It’s a wild exaggeration, of course, clearly intended to propel Angela Merkel, the German Chancellor, whom he met in Berlin recently for crisis talks, into a joint-effort to save an impossible dream. The language is clearly intended to hit the Germans at the most vulnerable spot in their national psyche, past unhappy memories, ever present dangers; it’s a form, if you like, of historical blackmail.
The Greek crisis is a superb demonstration of the intellectual absurdity and institutional vanity at the core of the whole European maze. There it sat, right from the outset, a bit like a brooding Minotaur. The important thing here is that we are dealing with a political as much as an economic crisis, perhaps more of a political crisis. We are dealing more specifically with blindness, blindness and hubris caused by a combination of self-delusion and self-interest.
The euro itself, the single European currency zone, was always about prestige, a desire for the grand gesture. Looking at it in hard economic terms who would ever have agreed to allow the Greeks, or the Spanish, or the Portuguese, or the Irish to join the club? All it would take is for these fragile economies to come under sustained pressure for questions to be asked about the operation of a whole euro zone, combining rich and poor and supposedly treating them as equal partners.
The Greeks, the poorest of the European cousins, were effectively given a euro credit card, and they used it, without caution or reservation, almost as if they had won a lottery, which, in a way, they had. The Germans were paying, yes, but they also benefited with a massive trade surplus, another source of imbalance.
The Germans in particular are heading for the perfect storm; they have too much of their economic self-interest invested in the euro-zone to allow it to collapse altogether, but they are horrified of the consequences of countries like Greece riding on the prosperity of the old Deutch-mark, abandoned with considerable reluctance.
We know the Eurocrats are not fond of votes. After all, they have a tendency to go the wrong way. But the Germans are least fond of a particular kind of vote than any other European nation, so much so that referenda are actually banned by law because of the use they were put to by the nasty Nazis. Just as well for the Eurocrats, I suppose, because the Germans would never have abandoned the D-mark if they had been given a choice on the matter twelve years ago.
At the time the opponents of the euro ran a campaign warning of the dangers of being linked up with the ‘spaghetti money’ of southern Europe. So, poor old Angela finds herself in an impossible position. Pressures at home force her to talk tough. Auntie Angela does not come to the Greeks bearing gifts, no, she waves her Aryan finger and talks austerity. Think of tomorrow, she says.
Alas, the Greeks have been spending, as if there was, well, no tomorrow. But tomorrow is here and Europe has been wounded in its Achilles’ heel, the poison now spreading throughout the body. An ancient Greek myth thus becomes a practical reality. How the gods love irony.