16 May 2010

Europe's crisis -- beyond economics

Britain is not the only place in Europe that held a consequential election this month.

Most Americans have barely heard of North-Rhine-Westphalia (German Nordrhein-Westfalen, usually abbreviated NRW), but it's by far the biggest of Germany's sixteen states by population, with 19 million of the country's 84 million people. The state held an election a week ago today, and voters used it to vent their wrath at German Chancellor Angela Merkel's response to the economic crisis in Greece.

Most of us are vaguely aware that Greece has recently been going through one of those skull-grindingly boring but Very Important And Dangerous financial crises which can only be resolved by a government shelling out unbelievably huge quantities of money to "bail out" something or someone. The bailout duly came in the form of massive loans to Greece from the EU, meaning in practice largely from Germany, since it is the EU's largest economy and has the deepest pockets to tap. Greece has already defaulted on its debts several times during previous crises, raising questions as to whether these new loans will ever be repaid either. Worse, there are also fears of similar crises in Spain or even Italy, much larger economies than Greece which would presumably require even bigger bailouts.

The media here have reported all this in bloodless terms of how much those godlike entities known as "the markets" approve of the German government's sober and responsible decision to cough up the cash for the bailout. German taxpayers, however, are steamed. Having already gone through a tough period of belt-tightening as Germany reformed its own economy and dealt with the recent global recession, they now find themselves on the hook for the aforementioned unbelievably huge amounts of money (it works out to around $3,000 per taxpayer) to rescue a foreign country which conspicuously failed to take such measures -- and they may be on the hook for more and more, with no clear limit, if Greece runs into trouble again or similar crises erupt in the other messy and un-Germanic economies of Mediterranean Europe.

A few days after the deal was announced, the NRW election hit, and voters got their chance to punish Merkel. They handed her conservative CDU party the worst electoral result that it had ever received in the state, causing the party to lose its control over the Bundesrat, the upper house of Germany's parliament. The Greens, Germany's biggest non-establishment party, got 12% of the vote, their best result ever. To get a sense of the fury animating the German people and their powerful tabloid media, see here.

The German people never liked the euro, the European Union's artificial common currency, not much relishing the thought of their hard-earned pensions being paid in pan-European Monopoly money instead of rock-solid German marks. Now they are turning against the EU itself, coming to recognize it as a scam which brings them few benefits and requires them to subsidize what they view as undisciplined, disorganized, profligate foreigners.

The EU has always been a project of the political elite, imposed by stealth and high-handed political maneuvers on the grumbling but oddly-passive European masses. At various times, referenda in France, the Netherlands, Denmark, and Ireland have rejected this or that move toward "ever closer union", but the elites arrogantly bulldozed aside all opposition and marched on.

The opaque and expensive (and corrupt) EU power structure has managed to make the public in pretty much every EU member country feel that their own nation was being treated unfairly in one way or another, and the recession is now compounding the problem. An example of the depth of the acrimony in which the project is sinking is provided by this recent spat between the EU authorities and Britain, which is a member of the EU but never adopted the euro currency. Britain has contributed £13 billion to help deal with the immediate crisis, but has refused EU demands that it provide a further £50 billion in loan guarantees to help stabilize a currency it doesn't even use. EU officials responded by telling Britain, in spiteful and insulting terms, to expect no help from them if its own currency, the pound, runs into trouble.

Britain does have some serious economic problems of its own, but I suspect that that £50 billion kept at home will be of more value in dealing with them than the increasingly-dubious prospect that Merkel might be able to extract yet another huge pile of cash from Germany's already-furious taxpayers to fund a hypothetical future EU bailout of the pound. If anything, the EU's insults might help Britain's new Prime Minister, David Cameron, unify his own people behind the tough measures which he will need to take to clean up the awful mess left by his predecessor; the British people already resent being bossed around by the EU.

The crisis in Europe is not just economic. The arrogant political elites are solidly pro-EU, but how much longer can they ignore popular disgust with an institution which imposes such huge costs (both in money and in hamstrung national sovereignty) on its core countries? There are votes to be won, millions of them, for any politician bold enough to defy consensus and openly declare that it's time to put this failed experiment out of everyone's misery.

Update (17 May): Read this too.


Anonymous Reverend Manny said...

First off, great blog.

Secondly, I just want to underscore your point about EU elites ignoring the street-level impact of their policies. Accountability in the EU, especially to the public, will be very difficult without some sort of democratic (or transparency) process.

I don't think that's likely to happen for either EU elites or the street.

16 May, 2010 14:04  
Blogger Ranch Chimp said...

The way I see Greece and Europe right now, is like a "preview" before the actual show ..... heh, heh, heh, heh, heh ....I mean looking at how much they have (Greece) been "in debt", looking at how mmany of it's population get's government asasistance, looking at all the parked yacht's but low percentage of millionaire's,at the GDP, etc, etc I'd say their in fer a "heap O'shit"! I wonder how many folk's are questioning the loan and asking themselves how and when would they pay back their loan?, and a behind the scene's look which you wont hear now from our politcal parties of how much money America will have to put into this as well. Now I know that many will say America wont have to pay, that's crazy, etc, etc ....Oh really? Heh, heh, heh, heh, heh ....rest assured, the "fun has just begun" :)

17 May, 2010 13:37  
Blogger Infidel753 said...

Rev. Manny: Thanks. It seems that the whole EU project was designed to avoid public input or democratic accountability, precisely because its perpetrators knew that it would be unpopular. They hoped that by the time the public figured out they were agglomerating the separate countries into a giant oligarchical super-state, it would be too late to stop it. My point here is that the economic crisis is putting unprecedented political strains on the unification project. The French-German partnership is the core of it, and even that is now in danger of falling apart.

RC: I can't see the US getting involved with this. We have our own problems to deal with and are already running a deficit. A Greek default or collapse would pose much less threat to the world economy (certainly to the US) than a Wall Street collapse would have done. What I think is worrying the EU elites is that if Greece isn't bailed out, it might try to escape its problems by getting rid of the euro and bringing back its own currency which could depreciate. The EU, for political reasons, doesn't want to see any country give up the euro.

18 May, 2010 02:02  
Blogger Holte Ender said...

Not too long ago the Euro was championed as it roared above the dollar and was seen as a currency to replace dollars in the oil trading business. Times change pretty quickly, and they will change again. Britain should never have joined the EU, but it did. The elements of British society who still see themselves as a great power were always against it. Not joining the Euro zone meant they had one foot in and one foot out. Either in or out I say, one thing or the other, the time may be coming to choose. I don't mean a referendum, that's what elections are for.

18 May, 2010 16:28  
Blogger Infidel753 said...

It looks like they may well get "out" soon enough.

19 May, 2010 07:14  

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