Opinion Sur
Instead of solving its crisis, the European Union postpones and prolongs it. This state of irresolution suggests a more serious and profound evil: the loss, perhaps final, of historic vitality. While I write this article, markets have settled down for the umpteenth time. The European Union granted Greece another loan in exchange for new promises of austerity. And for the umpteenth time, there will be another alarm, another crisis, and another ‘bailout’ in the near future. European Union leaders insist on ‘remedies’ that just prolong the agony of peripheral euro-zone countries and that do not solve at all the problems of design and structure that are affecting the entire region.
We must ask ourselves why it is they insist on the same recipe that reasoning and fact clearly prove wrong. In the Greek case, a plausible explanation is that, by postponing an inevitable default (or by setting it in slow motion), they help creditor banks improve their balance sheets, socialize losses even more, and pass the buck to the lower-income population In a cruel parody of a Greek custom, they make the poor pay for the party’s broken dishes. In the clean terms of economic science, this is called ‘an internal devaluation’.
Of course globalized elites (eg. Greek ship owners) have long had their money kept abroad (in Greece alone, the shocking figure of 200 billion euros). Northern Europeans treat Greece (as they will soon treat Portugal, Ireland and perhaps Spain and Italy) the same way the International Monetary Fund used to treat the then underdeveloped countries that today are called ‘emerging markets’ and that are doing better than their developed peers.
Why do not these European ‘solutions’ solve anything? There are five reasons, and they are all decisive.
First, severe austerity measures do not create growth. They only exacerbate debt, even if a reduction is applied to it. In several countries, and after repeated measures, debt increased by 40% since the beginning of the crisis: from 120% to 160% of the Gross Domestic Product.
Second, after Greece, other European countries (Italy, Portugal, and Spain among them) are still weak chips in a game of dominoes. There unemployment is alarming, personal and corporate bankruptcy increases, and social unrest is explosive. Tension between countries is also increasing. Union shifts to disunion.
Third, European banks themselves do not believe in the alleged ‘solutions’ of rulers: they cling to their funds (great part of those granted as easy loans by public treasury and the European Central Bank) and do not lend to those wishing to produce.
Fourth, the European economy as a whole is still contracting and is in effect in free fall. Furthermore, deadlines to pay the debt are not only Greek, but they also apply to France and Italy (these two countries alone will have to refinance 795 trillion dollars in debt). Any misstep can make the entire European edifice collapse.
Fifth, the rise in oil prices makes the situation worse. If the reader is wondering how a contraction in demand (because of a fall in economic activity) can possibly be accompanied by a price increase, the answer is in the fact that energy consumption in emerging powers is what truly drives prices. The simple arithmetic indicates the global economy has ceased to dance to the Western world’s pace.
In short, nothing has been solved in Europe. As for the United States, if its economy is looking a little brighter, is just because the European, in comparison, looks so bad.
Let us not fool ourselves. Twenty years after the cold war ended and centrally planned economies collapsed, the world did not shift from bipolar to uni-polar. The world has become multi-polar (several powers) and one-dimensional (a single market). The struggle is no longer between capitalism and socialism, but between those who are to define what kind of capitalism (among the several possible) shall prevail, and where. In that context European perspectives are not encouraging. The single currency, without a central government, is a straitjacket. Collegial leadership is tainted by overwhelming mediocrity. Eurocrats call themselves technocrats, but they are actually accountants with neither vision nor passion. They do not trust democracy; they want to live by the day (and always a day late and a dollar short), compromising the future of their societies. If Europe’s youngsters represent that future, let the reader examine the following youth unemployment rates per country and reach his own conclusion.
Youth unemployment rates (sample of countries)
European average: 22.4%
Spain: 49.9%
Greece: 48.1%
Portugal: 35.1%
Italy: 31.1%
Ireland: 29.6%
Poland: 27.5%
Hungary: 27.3%
Cyprus: 27.0%
Estonia: 25.1%
France: 23.3%
Sweden: 22.4%
United Kingdom: 22.2%
Belgium: 21.2%
Finland 20.1%
The only ones ‘off the hook’ are:
Netherlands: 9.0%
Austria: 8.9%
Germany: 7.8%
Source: Business Insider, 21/3/2012
My own conclusion is aligned with the perspective of the great Russian novelist Vladimir Nabokov many years ago: ’After all, Europe is over’.
