Thursday, June 23, 2011

The Greek crisis

The Melbourne Age has run as its main opinion piece today a column on the Greek crisis. Unusually for The Age the piece, by Simon Jenkins, has a hint of traditionalism about it. Jenkins's argument is that closer European union is a mistake because it is an attempt to force uniformity on significantly different cultures:

Closer European union, so called, was a bad idea for precisely the reason now seen on the streets of Athens. It was an attempt by a supranational economic authority to supersede national democracy. Bluntly, it assumed the commercial culture of ''greater Germany'' could be imposed on a wide variety of cultures by virtue of geographical propinquity. Countries with a high propensity to work and save would discipline those with a lower one. Banks would finance it all. It was fantasy born of utopia, the perfect precondition for a sovereign credit bubble
He writes too:

The lesson is clear. Sovereign states with distinct political cultures should never surrender control over internal affairs to foreign agencies

Federation can make sense when people share a common tradition, as was the case when the Australian states federated. But that's not so much the case in Europe. The English have a long history together distinct from the Russians who are again distinct from the Spanish. The European project ought to have been one of co-operation between sovereign nations rather than an imposed, top down, bureaucratic move toward federation.


  1. Not everybody in the UK and Europe is at all pleased about the development of the European super state. Not even some Euro MPs themselves.

  2. Mass immigration achieves the same effect as Federation, it's just instead of moving the border you move the people. Either way, though, you wind up trying to govern a wide variety of incompatible cultures with different levels of personal discipline.

    If all the Greeks moved to Germany and acted the way they do in Greece, then that's the same effect as a Federation of Greece and Germany (except the latter is easier to dissolve when it doesn't work, of course).

  3. To understand Greece now you need to know five bits of background first.

    1. Not a very stable political culture, mostly because during WW2 the Communists killed off all the other resistance groups they could, mobilised those groups supporters whilst hiding their loyalty to Moscow, and then tried to take over the state. Since then the Left/Right divide in Greece has been huge and has led to coups and other nasty things.

    2. Since the end of the last dictatorship the Greeks have voted in a variety of wasteful left wing idiots and corrupt right leaning idiots. Each side promised lots of goodies and delivered with MASSIVE state employment and spending.

    3. Crippled by official tax rates, small and medium [and eventually large] businesses have developed a culture of not paying any taxes if they can get away with it. Double book-keeping is EVERYWHERE. In election years the incumbent often pulls the tax officials off the streets to get businesses onside, the revenue stream inevitably collapses as a result.

    4. Employing half the population with money that the other half increasingly refuses to pay bankrupted the country.

    5. I have loved every Greek person I have ever had the pleasure of associating with [bar one university lecturer], but they beat the Jews I have met for "Massive chip on shoulder award". According to the Greeks EVERYONE is out to get them and/or owes them something, even the other Greeks.

    The Red Plague put down deep roots in the minds of many Greeks thanks to the Italian/German/Bulgarian occupation, the country has never really recovered.

  4. Anonymous said...

    "Not even some Euro MPs themselves."

    Yeeeerrshh.... but there have been anti-EU MEP's since the Euro-parliament was created, and they have traditionally been very outspoken as well.

    The danger from the EU is not from rogue MEP's [they are practically powerless for a reason] but from the second Greek collapse.

    If Germany [with help from France and Britain] bails out Greece AGAIN then Portugal, Ireland, Spain and Italy will know they have nothing to fear since the Eurozone will seemingly prop up any country in danger of defaulting.

    With the massive domestic pressure to sustain over the top public spending the leaders of most of the above countries will push the limits as much as they can to save as many votes as possible.

    This will put even more pressure on Germany and France.

    The very second those two countries decide to stop propping up their southern neighbours the EU will be put under massive strain. The Eurozone would likely collapse and possibly the EU with it.

    Interesting times.

  5. "The European project ought to have been one of co-operation between sovereign nations rather than an imposed, top down, bureaucratic move toward federation."

    It has long been my opinion (and recall, I am an American) that the European so-called Union has always been a project of the US State Department. That is, of the permanent bureaucracy in the US; and so fostering a European political union has been permanent US "policy" across the decades, regardless of Administrations -- never mind that any fool (*) could see that it must fail, and badly, and probably in bloodshed.

    (*) not just any fool can land a permanent gig at the US Dept of State.

    the WV for this post is "fuled" ... which might sound like "fooled" ;)

  6. Ilion, I believe you are right. I recall reading somewhere that the roots of the EU can be traced to an organisation created in the early 1950s by Americans to "unite Europe and prevent any future wars". I can't remember the organisation's name though.

    The whole diversity project in Europe continues only because it's backed up by the American military and economic might.

  7. According to some bloggers if Greece defaults then Ireland, Itally and Portugal will default. And if Ireland, Italy and Portugal default then the crisis will spread to Spain. And a Spanish default would be the end of the EU and the Euro since they would unleash a major depression. Not entirely sure if it's accurate though.

  8. The reason that a Spanish default would be a catastrophe according to some bloggers is because the size of its economy is huge plus it's kind of similar to Germany and France in some aspects. And we all know that Germany is an economic powerhouse. Just picture a smallish (in comparison to say Germany and France) but midly healthy economic power (compared to say Portugal and Greece) falling. That's Spain.

    This is also a huge Greek crisis because a lot of taxpayers and politicians from Britain, France and Germany don't want to bail out Greece any longer unless it takes austerity measures even further.

    I mean why would hard-working Germans bailout a Greek man who has a a nice standard of living but doesn't even work? Especially when they have their own debt problems?

    According to some statistics about 40-50% of Greeks don't even work and live of the welfare state thanks to the other 50-60% that do work.

  9. In short the Greek crisis is the first piece in the domino effect.

  10. There's an acronym that refers to the PIIGS which precisely predicts the order in which they will default: GIPSY


  11. Hard to see how an effective united Europe would benefit the USA. How the EU has actually played out - with a lot of divisive bickering - well, I'd love to think that was the result of devious US policy instead of European incompetence, but I doubt it.

  12. ""According to some bloggers if Greece defaults then Ireland, Italy and Portugal will default.""


    It looks likely to go that way if the first dominoe falls, but it would be more accurate to say that if Greece defaults there is very little to STOP those countries from pursuing policies which will cause them to default.

    Roughly the same thing you said; many more words.

  13. "if Greece defaults there is very little to STOP those countries from pursuing policies which will cause them to default."

    If Greece does not default, it will be because they get bailed out. Then other countries will stay on the same path of borrowing in the knowledge that they, too, will get bailed out. Eventually all of them, including Greece, will hit their credit limit and need a bailout or risk default, and eventually they will hit a point where they can't be bailed out ad=nd default WILL occur.

    You can't save a deadbeat from default by loaning him more money any more than you can cure a drunk by giving him more booze.

  14. "You can't save a deadbeat from default by loaning him more money any more than you can cure a drunk by giving him more booze."

    Very true, most economists would agree that Greece must eventually default, no matter how many bailouts they get.

    The EU however thinks that this will shatter the ideal of Euro-intergration as inevitable. And they are probably right.