Sunday, April 11, 2010

Greece And The Future Of Euro-Idealism

The Euro-zone countries have agreed on a low interest loan package to bail out Greece, which, at least for the time being, delays but not obviates the need for what is likely to be a nasty sociofinancial correction for the debt-ridden country. The problem, as Johnson and Boone point out in their article, is that this package doesn't solve the underlying problems that gave rise to Greece's current predicament. The country still has an unsustainable GDP-to-debt ratio, and is still hampered by a sputtering economy and massive government liabilities which appear politically impossible to reduce. Bailing them out sends a strong message to countries which are heading toward similarly dire financial straits (Portugal, Italy, etc.) that they needn't worry about getting their own fiscal houses in order. And while E.U. bureaucrats are apparently perfectly willing to order a transfusion to keep the current euro zone intact and send the bill to taxpayers in Germany and other strong northern European economies, it appears that the taxpayers themselves are none-too-pleased about it. Take these three realities together and the future of the monetary union appears rocky at best. How long can it endure while citizens in Europe's wealthiest countries are made to toil to subsidize the indolence and profligacy of their neighbors?

Truthfully, the euro always made more sense as a Pan-European ideal than it did as an economic policy. Bad things tend to happen when you de-couple the monetary situation of a country from intrinsic economic development and render it instead dependent on foreign influences over which it has no control, as the history of interwar Germany attests. That situation was somewhat different, and I'm not saying that modern Germany is endanger of reverting to fascism because its citizens resent footing the bill for Greeks who want to retire and start drawing overgenerous government pensions at fifty. But I do think we're likely to see a decline in pro-E.U. feeling, and the idealism that gives rise to it. Conversely, I expect that nationalist and isolationist sentiment in Europe, which despite a few upticks has for the most part been in steady decline since the end of the second World War, is likely to begin to rise again, and the fact that robust economic powers like Germany are monetarily lashed together with economic basket cases like Greece is going to make that problem worse, not better.

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