Herbert London: Greece At The Front Of The E.U. Line
The Greek Population, or more than sixty percent of the population, voted “no” in the recent referendum, a position in opposition to austerity or any concession for the European Central Bank (ECB). Apparently Greeks love things just the way they are. Unfortunately, others in Europe—more specifically Germany—is unwilling to pay the bill for Greeks to retire in their fifties, receive disability payments for phantom ailments and conduct themselves so profligately that the debt has escalated to over 300 billion euros.
Lady Margaret Thatcher once said socialism will lead to running out of other people’s money. Well that just happened. Even if the ECB comes up with a compromise that keeps Greece in the European Union, the arrangement cannot possibly be sustainable. A hard working businessman in Hamburg will not continue to support an Athenian municipal employee who wants to retire at 55.
This is the first major crack in EU solidarity, but by no means the last. Portugal, Spain and Italy are likely to collapse on the heels of Greece. The world is observing the unfolding of the Union and the virtual downfall of the euro. Perhaps the euro was bound to fail from the outset as the skeptics predicted, but the Greek vote is the final straw.
Despite assurances from other members, the productivity schism between north and south Europe is clear. Band-Aid measures may seem to solve the issue, but it is truly irresolvable. Claims that markets are insulated from the effect of the Greek vote are accurate as far as they go. But they don’t go far enough. Even if the hazard caused by Greek default is relatively minor, it is the foreshadowing of a dramatic shake-up or shakedown—depending on your perspective.
Europe is awash in debt. Governments have attempted to unload this debt problem on the banks that are in a far more precarious position than the public is aware. In fact, it is unlikely that major banks could pass a legitimate “stress test.”
Since this is an unprecedented moment, the question is where does the E.U. go from here? Obviously, statesmen will spend sleepless nights negotiating. They will ease the currency drawing down value and make an offer to keep Greece in the Union. It may work…for a while, but not for long if Greeks refuse to change their ways. Inflationary pressures will rise as the euro dips well below parity with the dollar. The volatility in the markets and the pressure in the Greek economy will unquestionably result in chaos, a chaos that extremist parties from the left and right will try to exploit. Greek politics seemingly presage the politics emerging on the continent, an eerie repeat of the 1930s.
There is a shadow cast over Greece. It is the awakening of the ambitious Russian bear that sees an opportunity to control the eastern Mediterranean through influence over Greece. A Russian presence from Tartus in Syria to the Aegean would force the hand of the United States at a time when U.S. interests are withdrawing. As a consequence, the Greek financial collapse has deep-seated national security implications, albeit a point few have made.
What Greece, and in fact most of southern Europe, has not learned is what Thomas Jefferson noted more than two centuries earlier: “A democracy will cease when you take way from those who are willing to work and give to those who would not.” The “equality” argument that has penetrated western habits and has been promoted from De Blasio to Clinton to Warren to Holcomb and Tsipras of Greece is undermining the entrepreneurial spirit in the West.
While equality has the ring of fairness, its method is redistribution. But you cannot increase wealth by cutting it in half and you cannot persuade a German that he has an obligation to support a Greek. If this is the standard by which the E.U. operates, it has to fail. Greece is merely at the front of the line.
Herbert London is President of the London Center for Policy Research, a senior fellow at the Manhattan Institute and author of the book The Transformational Decade (University Press of America). You can read all of Herb London’s commentaries at www.londoncenter.org
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