Tuesday, May 10, 2011

Admit it: the the dream is over, the euro is on its last legs and so, sooner or later, is the whole EU ‘project’ RIP? I don’t think so. There will be one almighty blame game

The old adage runs that the secret of comedy is timing, and that is surely something the big brains in Brussels will be taking to heart when they contemplate the latest news from Greece. And that is bad. It seems the billions that were lent a while ago to help the Greeks pay the paper and electricity bills and generally sort themselves out was not enough. They now need even more euro moolah. That, of course, is bad enough for politicians Europe-wide who have to square things with the voter. I know we get the impression that politicians exist in a world of their own, making decisions about our lives without apparently a thought about consulting us, but that’s not quite true. Every few years, they are obliged to get the voter to validate their existence, and every few years the voter gives many of them a resounding raspberry.

That could well be the case, for example, in Germany, which has its next federal election in October 2013. And after losing control of the state of North-Rhine Westphalia last year, most probably because its voters were annoyed to be bailing out what the regard as feckless Greeks, Angela Merkel will not want to take any more such risks. The same will be true in other countries as politicians in all member states will balance doing the right thing for our European cousins in Greece with how best not to fuck off the electorate even more. And if push came to shove, guess who would win? But all that is merely the sideshow.

A respected German economics commentator, a chap called Peter Bofinger, has spoken for the first time about the possibility – he regards it as a probability – that the Greeks will abandon the euro and revive the drachma. You can find an account here or, for those of you who prefer to live life with rather fewer subjunctives and subordinate clauses, there is an account here from Der Spiegel which first reported Bofinger’s observation. (Incidentally, we hacks always use that trick, calling the guy or we are about to quote or write about a ‘respected’ or an ‘eminent’ or something along those lines – it is intended to reflect on us, the writer and convey just how well-read, well-informed and well-connected we are. It’s even better if the reader has never, ever heard of the guy or gal being quoted, because it makes them feel the fault is theirs and we, be default, rise even further in their estimation. And, no, I’ve never before heard of Bofinger, either.) Now that has really put the cat among the pigeons. It’s not that it has so far never occurred to anyone that the Greeks would do such a thing, it’s just that everyone believed that if the possibility remained unacknowledged, it would somehow go away.

We’ve all been there, of course. That moment when you know for certain that your girl (or boy) has had enough and is going to jack you in. You just know. But as long as you don’t acknowledge the possibility, all seems to be well. Or the time when your car misbehaves so badly that you just know the problem is just an untidy back seat but something serious. But you manage to persuade yourself, generally by not thinking or, heaven forbid, talking about it, that there isn’t really a problem, or if there is, it will sort itself out sooner or later. And that is what Brussels is doing: in their hears, or rather, in their stomachs, they know the game is up, that the dream is over. First it will be the Greeks, then perhaps the Irish, then there will be a mad dash for the exit – led by the Germans, who aren’t half as daft as many think – as everyone tries to salvage what they can. And then, well, then the dream is over.

But there is another way, although it is a long shot. And this is where timing comes in: if somehow – somehow, though the Lord knows how – the worst elements of the Eurozone could be expelled – OK, call them the Greeks – then there might just be hope for the rest. That’s what the wise ones are considering in Brussels, quietly, privately, streng unter uns, and woe-betide anyone who speaks out of turn.

It’s nonsense, of course. It’s still all going to go pear-shaped. I know it, you know, my sister knows it, my brother-in-law (who has a background in finance) knows it, the Germans know it, the Brits know it, every last significant and insignificant ‘member’ state knows it, the Yanks know it, and the Chinese know it. What we don’t know is the how and when. And that is the crucial information. Some Eurozone members will come out of it all smelling of roses (the Germans, I should think), some will be pauperised for years to come (the Irish, Spanish and Portuguese?) and others still will just be glad that it’s business as usual. The Greeks have long moaned that their tourist industry is lagging far behind that of Turkey because they are tied to the euro and its interest rates and the Turkish aren’t and, moreover, can devalue just when the hell they like. We want some of that, too, please, the Greeks are telling each other. Well, they won’t have to wait too long.

. . .

Another rather ominous development which might indicate all is not well in the EU and that its demise might come rather sooner than it inclusion in Heaven to sit at the right hand side of God the Father was all the fannying about with the Schengen agreement. This allowed the citizens of signatories to the agreement – the United Kingdom and one or two other countries wisely passed on the opportunity to open their borders to all and sundry – free passage to another signatory state with no hindrance or checks of any kind. But things got hairy recently when Italy was inundated with refugees from North Africa and, under the agreement, allowed them to cross into France with no checks at all. (Because of France’s colonial past and former ties, they felt a stronger kinship with France and many also speak French.)

France immediately called foul and said the refugees should be looked after by the first country they come to, in this case Italy. There then came a few days of inter-governmental argy-bargy until it was finally announced that the Schengen agreement would temporarily be suspended. I can see why, of course, but I am obliged to point out that suspending something like that when the going gets tough doesn’t actually inspired much confidence in all the other treaties and agreements in place. Are these also to be ignored by anyone as soon as it suits them to do so?

A further irony is France’s position: they weren’t quite as sensitive to the niceties of refugee protocol when many passed through France on their way to the United Kingdom and hurried them on their way just as soon as they could. That sounds like a reasonably good example of hypocrisy to me.

. . .

When the euro goes, the whole EU ‘project’ will be fatally damaged. The idea was always to build a political union which was so tightly bound together that any thought of going to war would be very quickly abandoned. And the currency union was the cornerstone of what was to become that political union. It all went well, of course, as long as it was just the six, then the 12, members, who were all – more or less – gentlemen and might be expected to play by the rules. When the obituary is written, I think historians will realised that the rot set in when, flushed with the success of how well it had gone so far, the EU pushed for greater integration ever faster. Certainly, there were apparently good reasons for that course of action, and certainly ‘expert’ after ‘expert’ could be wheeled out to provide the necessary hi-falutin’ pseudo-intellectual justification for ever faster expansion. It all became especially important, they convinced themselves at the time, when the Soviet bloc collapsed.


But in order to do what they persuaded themselves was the right thing, they turned a blind eye to so much. And that is all coming back to haunt them. Brussels knew full well that the Greeks were telling porkies and had massaged their figures when the joined the euro. They knew full well that billions were being skimmed off by the various mafias in Italy from all kinds of projects. They knew full well that far from being a fledgling democracy Bulgaria was still run by the same gangsters who had called the shots when, nominally, the Soviets were in charge. But it was the big picture, you see, which they looked to, a European brotherhood of man, a kind of left-liberal nirvana in which the wrong ’uns had to be tolerated because sooner or later they would see the error of their ways, repent and join the fold.

What this means for all those still queuing up to join the EU is anyone’s guess. I should imagine that a large number of Croat farmers will be mightily relieved if the attempt by their government to join the EU fails because by then there will no longer be a viable EU to join. Those farmers have been rubbing along quite nicely and really do not want to be inundated with a welter of regulation with which they had to comply in order to stay in business.

. . .

Incidentally, one of the many facets of euro thinking which borders on the bizarre was the insistence that member states should be fined for various transgressions, especially when those involved them trying to extricate themselves out of some financial mess. So, for example, a while ago, every one in the euro promised that its deficit would be no greater than 3 per cent. If they went over the limit, they were fined. It strikes me as ineffably odd to add to the financial woes of someone by fining them if they find themselves in that kind of situation. Naturally, though, it wasn’t all that straightforward: it is Dick and Dora economics to pretend that any nation’s budget is a straightforward matter of having or owing money. For one thing, many of the figues with which they work are estimates, some are assumptions, many are out of date by the time they are used and often several figures simply do not relate to each other.

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