Summary: Recent events in Europe reveal much about the nature of democracy in the West, showing our leaders’ contempt for us. Europe is just America as seen in a mirror. See the links at the end for more information.
Europe is stunned. The Greek prime minister wants to allow the people to vote on the euro rescue plan for their country. … he has made the right decision. … The Greeks will, for a change, decide for themselves how they and their country will move forward … every Greek gets to decide, and can no longer complain about their government bowing to international demands. They have had no real opportunity to do so for quite some time.
— Sven Böll, op-ed in Der Spiegel, 1 November 2011
“We don’t want elections. We want to govern.”
— Premier Silvio Berlusconi, taken our of context but symbolically true (source: AP)
Papandreou, Prime Minister of Greece, astonished Europe’s leaders by calling for a referendum on the austerity package they’ve imposed on his nation. Their horror — and subsequent events — revealed much about the political foundation of the project to unify Europe.
(1) The project relies on support of Europe’s elites, not its people. For example, defeat of the Irish referendum on the Lisbon Treaty in June 2008 meant nothing; only approval was definitive. They tried again, successfully, in October 2009. So Papandreou’s call for a public vote struck at the project’s great weakness. Fortunately it was only a manuever, quickly abandoned.
I trust the wisdom and the maturity of the Greek people and I trust them … I’m not saying this romantically, I deeply believe in democracy. … We would never choose to hold a referendum on whether we leave or stay in the euro. It’s not something you can ask the Greek people about. It is self-evident (that they want to stay).
— Greek Prime Minister George Papandreou to the Socialist Party’s members of parliament, Reuters, 3 November 2011
Conservative leader Antonis Samaras said “the new loan agreement is unavoidable. And it must be secured.” Until now Samaras has consistently opposed the austerity policies demanded in the bailouts, including the latest deal which euro zone leaders agreed only last week. (Source: Reuters)
(2) Despite the certainty with which US conservatives label it a left-wing project, both Left and Right support unification (driven by Europe’s wealthy elites). This gives Europe’s voters no real choice.
- Prime Minister Merkel’s coalition of right-wing parties allegedly opposes unification — especially the Free Democratic Party (FDP) — yet has strongly championed the highly unpopular programs to rescue the PIIGS (the left favors unification).
- Governments have fallen during the crisis in Ireland and Portugal, but the opposition parties in turn were equally or more supportive of unification.
- Greece’s conservative parties, let by the New Democracy party’s Antonis Samaras, opposed unification until Papandreou’s move put the project at risk — then they showed their true colors and supported the extreme measures being imposed on Greece.
Greece’s position within the euro area is a historic conquest of the country that cannot be put in doubt. This acquis by the Greek people cannot depend on a referendum. The country must feel safe and stable and that is the first requirement in order for it to be truly safe and stable.
— Statement by Greek Finance Minister Evangelos Venizelos on 3 November 2011 (“acquis” means agreement, “that which has been agreed upon”)
These dynamics should remind us of our own recent past. As explained by Robert Reich (Prof of public policy at the UC Berkeley, and Secretary of Labor for Clinton) in “Should Greece reject the bailout?“, Salon, 1 November 2011 — Excerpt:
We’ve been here before, remember? Here in the United States, at the end of 2008 and start of 2009. Wall Street had made lots of bad loans, and the question we faced then was whether to bail out the Street.
The difference is, we didn’t hold a referendum. Instead, the Bush administration told Congress the nation risked “economic Armageddon” if it didn’t immediately authorize a giant bailout of the Street – with no strings attached. Of course Congress hastily agreed. Hank Paulson, Ben Bernanke and Tim Geithner (as head of the New York Fed) then doled out the money. And the Obama administration (with Geithner installed as Treasury Secretary) gave out more.
So instead of allowing the Street to live with the consequences of its negligence, we bailed it out – and allowed the Main Streets of America to suffer the consequences.
If Americans had been consulted about the bank bailout, I doubt it would have happened the way it did. At the very least, strict conditions would have been placed on the banks in return for the money. The banks would have had to eat the losses of the predatory mortgages they sold, and help homeowners reduce those mortgages. They’d be required to improve the capitalization of small banks in communities across the country. They’d be forced to accept stringent new regulations, including resurrection of Glass-Steagall.
But Americans weren’t really consulted. It was an inside job. As a result, Wall Street has prospered but the rest of the nation hasn’t. One out of four homeowners is underwater, owing more on their homes than the homes are worth. And with the worst economy since the Great Depression, we’re now embarking on fiscal austerity. Either Congress’s super-committee comes up with $1.2 trillion of federal budget cuts that Congress agrees to – going into effect a little over thirteen months from now – or $1.5 trillion of cuts are made across the board. Meanwhile, states and cities have been slashing public services for the past three years.
So which is it? Rule by democracy or by financial markets?
For more information about Europe’s crisis (this will be updated)
- “Europe’s Plan To End the Debt Crisis – Putting The “Con” in “Confidence”, by Satyajit Das, Naked Capitalism — Part 1 and Part 2
- ” Exit From the EMU: The Logistics“, Elisa Parisi-Capone, Roubini Global Economics, 4 November 2011 — Subscription only. A detailed roadmap for an nation to leave the EMU.
- “Europe’s democratic deficit grows wider by the day“, The Telegraph, 5 November 2011 — “The Eurocracy’s contempt for the nation-states it governs is growing ever more flagrant.”
- “A Gravity Test for the Euro“, Kenneth Rogoff (Prof Economics at Harvard, former Chief Economist of the IMF), Project Syndicate, 3 November 2011
- “The eurozone decouples from the world“, Gavyn Davies (see his bio on that page), Financial Times, 6 November 2011
- “Wishful Thinking And The Road To Eurogeddon“, Paul Krugman, New York Times, 7 November 2011 — He adds a few notes to the above article.
- “Germany Must Do It, Not China“, Michael Pettis, Roubini Global Economics, 7 November 2011 — Clear thinking about the problems of Europe, unlike that of Europe’s leaders.
Other articles on the FM website about Europe’s crisis
- The post-WWII geopolitical regime is dying. Chapter One , 21 November 2007 — Why the current geopolitical order is unstable, describing the policy choices that brought us here.
- Can the European Monetary Union survive the next recession?, 11 July 2008
- The periphery of Europe – a flashpoint to the global economy, 8 February 2010
- A great speech by the PM of Greece. How soon until an American President says similar words?, 3 March 2010
- Governments cannot go bankrupt, 2 April 2010
- Our government’s finances are broken. How do we compare with our peers?, 8 April 2010
- The EU does Kabuki for Greece. Is it the next domino to fall?, 14 April 2010
- About the Euro crisis: the experts are wrong; the German people are right., 7 May 2010
- Former Central Bank Head Karl Otto Pöhl says bailout plan is all about ‘rescuing banks and rich Greeks’, 20 May 2010
- The Fate of Europe, nearing the point of decision, 13 September 2011
- Europe drifts towards the brink of a cataclysm, 26 September 2011
- Delusions about easy fixes for Europe, dreaming during the calm before the storm, 30 September 2011
- Every day the new world emerges, yet we see it not. Like today, as Europe begs China for loans, 15 September 2011
- Is Europe primed for chaos, as it was in July 1914?, 7 October 2011
- We see the outlines of the next cure for Europe. Will it work?, 14 October 2011
- Today Europe’s leaders took another step towards the edge of the cliff, 27 October 2011
To restate a point I have made on John Robb’s blog, Greece is the financial system’s Schwerpunkt.
* Greece has its own terrorist organizations {see Wikipedia}. Will they attempt to monkey wrench any agreement:
Potential points include:
* As the global financial system struggles to squelch the Greek uprising, more and more of its inner workings will become visible. This increases the potential to penetrate its OODA loops.
* Various forms of barter / informal economy are springing up in Greece. These could become prototypes for other such systems elsewhere.
If you think that purely formal political processes will settle this, consider that Greeks culturally are profoundly informal.
Greece is a dot, 2% of EU GDP. Do not confuse media attention with importance. It is — to use a trendy but bad analogy — patient zero. The EU is grappling in Greece with dynamics it will probably soon face with larger and more important nations, such as Italy.
As for terrorism,lost every nation has terrorists, which sometime flare up. What matters is magnitudes — the great mising element in Internet discussions. While terrorism might become a factor, there are few signs of that so far. Greece has accepted the depressionary austerity program quite well, far better than I expected
Italy may very well be the Schwerpunkt instead of Greece. ( I’ve said so on Robb’s blog, BTW) And only yesterday I read an article in either the NYT, WaPo, or LAT that even obscure Greek parliamentarians rarely venture out anymore and then only with armed bodyguards. Your “accepted the depressionary austerity program quite well” and my “Various forms of barter / informal economy” are pretty much the same thing.
The imposed austerity programs may be supported by both coalitions in Greece, but that does not prevent blowback. A common result is a loss of legitimacy, and the usual response is to not pay taxes. That is, an shift of activity to the grey economy. Off the books transaction, barter, etc.
Another point about Greece is that it had been a bedrock of stability for the Balkans, which are corrupt and disorganized.
Italy has its own problems with organized crime ( actually for a while loan sharks were the only source of finance there. )
Nevertheless, there currently is strife between ethnic Serbs and Albanians in Kosovo, which is a narco state. Bosnia is unstable. Organized crime pervades the Balkans.
To give you a flavor about the generalized mess in the Balkans, here’s an article about how Germany is now leaning on Serbia over Kosovo. The crisis in Greece distracts the Germans, angers the Serbs ( who are fellow Eastern Orthodox ) and generally does not help. The Balkans, which are already Balkanized, do not need this sort of problem right now.
“Germany May Delay EU Decision on Serbia“, Balkan Insight, 10 November 2011 — “Serbia’s EU candidacy may not be discussed in Brussels on December 9 unless Belgrade gets back to the negotiating table with Pristina, a diplomatic source has told Balkan Insight”
You imply, Europe is sovereign. In fact, Europe is today still very much under U.S. protectorate. A minor sign is was the strange Libya intervention, where the dear friend of Europe one year turned a corpse next.
A bold but absurd assertion.
As for Libya, he was even more our friend (especially the CIA’s rendition buddy) than Europe’s.
The Greeks have rediscovered an Ancient Power; with it, they can destroy the Euro!
A few quick points.
That referendum would have posed a hobbsons choice, default and leave the euro, fast economic Armageddon, or except the bailout package and face slow economic Armageddon.
The sad fact of the matter is for the immediate future the Greeks are dependent on the kindness of the fellow EU members.
Also the Irish Lisbon referendum passed the second time in Ireland only when the Irish government had the objectionable passages removed or renegotiated. I was in Ireland at that time, and found the debate to be rigorous and heated, during both referendums, and the electorate to be well informed, I did not get the impression of a democratic deficit.
Voters loath to risk the status quo, so do mainstream parties, only the parties at the fringes really oppose further EU intergtration or would want to leave.
(1). Your description is a gross exaggeration. Neither choice is “Armageddon”. Both staying and leaving are workable paths. Du to their past errors, esp joining the Euro, both have high costs. See the “for more information” section for links to article about this.
(2). No, Greece is not dependent on aid. Many experts believe the opposite, that leaving and defaulting is their only viable option.
“Greece is a dot…”
Yup. And here comes the Italian Dot! “Italy Calls ECB’s Bluff As Mario Draghi Is Forced To Double Italian Bond Purchases, Take Total To €110 Billion“, Zero Hedge.
Italy is not a dot.
Greece is a side show (or perhaps patient zero). Italy is the center ring of this circus. Their ten year bond is the single best metric measuring the stress of Europe. Financial and political.
The ECB is the fulcrum of Europe’s financial machinery. The stress on it’s leaders must be great.
There are no solutions for Europe now. Just choices
“Italian Dot”?
……..tongue firmly planted in side cheek.
Another good report: “The eurozone decouples from the world“, Gavyn Davies (see his bio on that page), Financial Times, 6 November 2011
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FM note: Yes, it is a good article. It appears as #5 in the For More Information section.
Sorry….I missed it; so much to read and such. Yours are usually quite hard to find and good.
‘Your description is a gross exaggeration. Neither choice is “Armageddon”.’
its an exaggeration, but not by much, I do stand by my point, the Greek referendum would have offered no real choice to the Greeks. This fellow puts it better than me {“European indecision is taking us all to the brink“, Colin McCarthy, Indepenedent (Irish newspaper), 6 Novem er 2011}
You can shout that these choices are armageddon or nearly so, joining the hordes doing so on our news media. That’s typical of crisises in the west these days. DOOM DOOM DOOM.
It remains absurd, however. On several levels.
(1) I’ve seen no expert analysis saying that such a outcome is likely, under any path. Continued austerity might result in a long recession. Perhaps one that provokes Greece to leave the the EU and default, now or later. Nations have changed their currency many times in the past. Nations have defaulted on their debts even more often. Well-executed, these measures can put a nation back on the path to prosperity. I have cited several papers expaining how this could be done.
(2) We do not know what the Greek referendum would have said. But in effect it would have been about accepting the austerity measures necessary to remain in the EMU. That is a valid choice — stay or go — because it reflects the choices available to Greece. You apparently consider it “no real choice” because both are unpleasant alternatives. That’s life.
McCarthy considers this a pointless choice because he advocates a third way — unification, with the ECB in effect monetizing the PIIGS debt. But no matter how much he desires this outcome (a wonderful thing for Ireland), it’s not in the power of the Greek or Irish people. It is a choice for the German people to make. We don’t get to reject our actual alternatives in favor of “#3 — Somebody gives me lots of money.”
After years of foolish public policy decisions, Europe has no “solutions” in the happy TV-sitcom sense. They have decisions to make. All painful in the short-term.
How bad might conditions get in Greece? Rather than expressing your forecast in metaphors, I recommend using actual history. As bad as the 1930’s? WWII? The post-WWII civil war years?
Or use conditions in other underdeveloped nations. Such as post-default Argentina. Latin American history offers a weath of scenarios.
Conditions in Greece would have to deteriorate a great deal to even reach the typical level of “busts” in modern underdeveloped nations. And could easily do so. What comes afterwards is even more important. Wise and bold policy measures to restore growth? Or continued decline?