In Europe, the politicians and bankers are preparing for the prospect that Greece will leave (or be kicked out of) the Euro Zone.
I'm not at all surprised that it has come to this. One of the problems of a currency union is that sharing a currency necessarily involves giving up a goodly measure of national sovereignty. A nation can run a deficit, but only if it has its own currency and only if people will buy its securities to fund its borrowing. Without its own currency, there can be no deficit spending unless the other nations (or the central bank) agrees.
The kicker here, for the Greeks, is that the driver of the EU banking system is Germany. Memories burn brighter in Europe and the German occupation of Greece, for the Greeks, might as well have happened in the last decade. So there is incredible resentment at the idea that the Germans will have a say in Greek financial affairs.
The relatively unmentioned thing is that Germany is a nation that has an export-driven economy and much of Germany's export market is the rest of the European Union. So the Germans on the one hand, want the "PIIG" nations to fix their economies, but on the other hand, if they do so with harsh austerity measures, then their citizens won't be buying German products.
Sometimes it is easy to forget why the European Union seemed like a good idea. The idea was to bind the nations of Europe closely enough that it would no longer be in the national interest of any state to go to war with its neighbors. NATO was part of that concept, though with NATO there was no loss of national sovereignty. The EU did involve that, with member nations giving up some sovereignty to the EU. The long-term goal was to, more or less, transform the EU into the United States of Europe.
That might have been a pipe dream. In the USA, the member states were not distinct entities for very long, maybe 160 years at most, before they united. Even so, the question of whether there is a strong or weak national government was one of the factors behind the Civil War, and the losers to that conflict have been trying to eviscerate the Federal government ever since.
In Europe, the identity of some states goes back from 200 years or so (unified Germany) to over 2,500 years, in the case of Greece and Italy. The EU process seems somewhat similar, at least on the surface, to the German unification in the 19th Century. The Germans had an advantage in that they had, more or less, a common language and cultural history.
For the EU, not so much. It's hard to see what the Finns and the Portuguese have in common.
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4 comments:
Historically speaking; bad national economics usually produce reprehensible political entities such as what was seen with the Weimar Republic and Czarist Russia.
I fully expect some really nasty crap (as in a mean bigoted political movement) to emerge out of Greece over this debacle and the fact they (meaning the EU) let it get this far along.
Brings to mind that old political adage about those who fail to heed the lessons of history are doomed to repeat them....and all that...
All The Best,
Frank W. James
Uhm, historically speaking, modern Greece has about as much to do with ancient Greece as modern Alabama has to do with the pre-European Alabama Indians. Greece was overrun by one set of invaders after another as the Roman Empire declined, then endured yet another invasion by the Ottomans once the Byzantine Empire collapsed, with massive population movements part of all of these. The language they speak is somewhat related to ancient Greek, but only because the Byzantines adopted a version of Greek as the official language of their Empire and imposed it on the (largely non-Greek) population of the area that later got conquered by, then wrested back from the Ottomans and set up as modern Greece.
That said, the issue in Greece is simple: They are in a deflationary spiral, and the only way out of a deflationary spiral is massive government spending funded by printing money. And the ECB isn't doing the "print money" part. (i.e., isn't buying Greek government bonds with freshly-printed Euros) because they fear this will cause inflation in *other* parts of Europe.
What this means is what the skeptics of the Euro said all along: that the Euro was a terrible idea that would last only until one member state's economy started going into deflation, at which point it would all come tumbling down. And we're there.
- Badtux the Economics Penguin
Send Jamie Dimon over as a special economic advisor for some laughs.
The truth of the Greek historical identity is pretty irrelevant.
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