Europe is driving full-tilt, foot on the pedal, into a brick wall

As far as I can understand the “strategy” of the EU, it is now to prepare for Greece to leave the single currency. Not that the Greeks themselves are anything like psychologically ready to quit: the politicians are punch-drunk, exhausted, and appalled at the loss of face and loss of security that would go with a sundering from “Europe”. Most voters choose pro-euro parties. But money is being withdrawn from banks; events are gathering momentum; and it is clear from their remarks that other EU leaders are getting ready for an outcome which until recently was held to be impolite to mention: the Grexit.

And then what? And then the strategy would appear to be to cauterise the amputation; to circle the wagons; to issue the most ringing and convincing proclamation to the markets that no more depredations will be tolerated; and to get the Germans to stump up, big time, to protect Spain and Portugal. We are told that the only solution now is a Fiscal Union (or FU). We must have “more Europe”, say our leaders, not less Europe – even though more Europe means more suffering, and a refusal to recognise what has gone wrong in Greece.

The euro has turned out to be a doomsday machine, a destroyer of jobs, a killer of growth, because it entrenches and exacerbates the fundamental and historic inability of some countries to compete with Germany in making high-quality goods with low-unit labour costs. Unable to devalue their way back into the game, these countries are forced to watch industry wilt under German imports, as the euro serves as a giant trebuchet to fire swish German saloon cars and machine tools across the rest of Europe.

Germany is almost alone in recording economic growth in the first part of 2012; Germany is doing well from the euro; and so the theory is that Germany should pay to keep the whole racket going by bailing out the improvident and the uncompetitive, just as London and the South East subsidise the rest of the UK.

Alas, it is not a strategy that is likely to work. As Angela Merkel has made clear, there is little political support – let alone popular support – in Germany. EU leaders may want a fiscal union, but it is deeply anti-democratic. We accept large fiscal transfers in this country because Britain has a single language and a single political consciousness in a way that Europe never will. Rather than creating an “economic government of Europe”, the project will lead to endless bitterness between the resentful donors and the humiliated recipients, as these diminished satrapies will be instructed to accept cuts and “reforms” – designed in Berlin and announced in Brussels – as the price of their dosh.

And it is not as if the markets will believe in these “firewalls”, or not for very long. If they can prise away Greece, they will know they can prise away others. As long as the euro can break up, there is always a risk that it will break up. So it is frankly unbelievable that we should now be urging our neighbours to go for fiscal union. It is like seeing a driver heading full-tilt for a brick wall, and then telling them to hit the accelerator rather than the brake.

Europe now has the lowest growth of any region in the world. We have already wasted years in trying to control this sickness in the euro, and we are saving the cancer and killing the patient. We have blighted countless lives and lost countless jobs by kidding ourselves that the answer to the crisis might be “more Europe”. And all for what? To salvage the prestige of the European Project, and to spare the egos of those who were wrong and muddle-headed enough to campaign for the euro.

Surely it is now time to accept that the short-term pain of a managed euro rupture – a wholesale realignment, possibly a north/south bisection – would be better than continuing to immiserate so many people around the continent.

At the end of a day in Athens, I was so sad at what I had seen that I went to a kafeneion and ordered a metaxa. And then another. At length, I fished into my wallet and found a rather handsome banknote, with an image of Apollo from Olympia. “Not today,” said the owner, politely declining my drachmas. “In a month, yes.” It will be awful for Greece, and turbulent for Britain, but at present I can think of no better solution.

14 thoughts on “Europe is driving full-tilt, foot on the pedal, into a brick wall”

  1. Greece should declare war on Germany and immediately surrender then as “South Bavaria” it could prosper in the Euro, Angela could then pay off its debts in return for all the sun-beds in Greece.

    Job done, this Statesman lark is quite easy really, once you get the hang of it.

  2. I wonder if the people who put together the Euro, and managed the Euro, and are now presiding over the destruction of Europe, are possibly the most highly qualified and highly paid group of professionals that the world has ever seen working together. I guess the very hairdressers in Bussels are MBAs.

    No, hang on, there are even greater minds, greater qualifications, and greater paychecks on Wall St. And just like the jerks in Brussels, they cock up, ‘from bean to cup’.

    But the public put up with it, so I guess they’ll carry on…

  3. The European Union was the coming together of a gang of Bullies with Germany and France as the leaders. In less that a few years they started acting like the bullies they wanted to be. Case in point is the Carbon Tax on Airlines on air space that does not even belong to them. The tax on the financial sector that UK opposes. These EU bullies got into a “we will do it because we can and want to” syndrome.
    Now the weaker of the bullies who joined them are being bullied because they can.
    Good Luck Greeks. Good Luck Spain. Good luck Portugal. Good Luck Ireland. No doubt they coined the acronym PIGS because that is what these bullies think of you.

  4. Hi Boris, what you are saying is what I have been saying for six years , from long before the “credit crunch” or the Lehman bust , before sovereign debt was wheeled out into the open , before derivatives were seen for the dastardly constructs that they are . I joined your “leaders group” hoping that once Brown was out of the way we might see some intelligent governance, sadly I am now despondent and disappointed with the actions of the “Coalition”. What is clear is that David Camerons obsession with gay marriage and employment law is tinkering around the edges because frankly he has no authority unless he has prior approval from Brussels.
    Until the financial system is reset , derivatives squared off and cancelled , debt purged and the State shrunk to a fraction of its current obscene size we will suffer endless economic “disappointments” as banks continue to be made whole and a totally impossible debt burden is placed on our shoulders through the perpetual increase in the national debt . The madness has to stop , people are committing suicide all over southern Europe and giving away their children because they can no longer feed them . The entire globe should default and then restart the system without bankers occupying the pinnacle of the worlds economy hollowing out productive industry in the process.

  5. Hi!, Patrons Of Boris Johnson Et Al:

    Oh!, how in the past we looked forward to such good times being measured by our best economic minds we were lead to believe but now here we are years later in the midst of the kinds of economic dissaray we wished to escape exchanging one kind of rottenness for another form of rottenness nowhere else to turn but down in the dumps. Goes to show that the best laid plans of mice and men can go extreemly astray from what was intended? If all else fails we can retreat to the sofa to watch eiher some football, baseball, basketball, hockey, soccer or rugby matches singing in our minds: “Let the world go away & take it of my shoulders!” Empires have come and gone people but “the world” still remains which is a vast glint of hope in an otherwise untamed atmosphere of monetary destruction from which mankind will live to learn another valueable lesson or two through the evolution of time. Take heart everyone mankind is very adaptable at overcoming their problems. We from the past will see this time someday as just another historical event that came and went as the chapters of our lives unfold. The book of life is far from the finish line and we’ll make it through this together too as we always have before.

    RUSS SMITH, CALIFORNIA
    resmith@wcisp.com

  6. @ nigel foster
    Greece is still in war with GERMANY. There is still cease fire status.
    You would wonder if you know all about this story.

  7. Greece is and always will be a loss making enterprise. Wipe out their debts and we’ll be back here again in another 10-20 years. If an acceptable solution is found to the current untenable situation, the Germans will go back to their factories and resume work and the Greeks will grab a bottle of wine and go to the beach and celebrate their good fortune.

  8. I can see why the Germans are so keen on austerity. They don’t have to do it! Rather like some well known cabinet ministers.

  9. “just as London and the South East subsidise the rest of the UK.”

    London is a cancer and needs cutting out of the UK. The city spivs and specs have turned it into a casino where when they win they get bonuses and when they lose the rest of the UK has to pay.

    Can you tell me why what used to be my saving interest income has now gone to buy Londoners overpriced property? The biggest winners of low rates are those with the largest mortgages, those are on London property. Savers all over the UK are subsidising Londoners.

  10. Yes! It’s Germnany’s fault!
    Germany made the Greeks pay 80K per year for their overstaffed subway workers & their unions along with their economically unsustainable & mathematically impossible pension plans.
    Grow up, there is no free lunch, even if you put it on a credit card at low interest, the waiter will eventually arrive with a bill for it all to be paid.
    The Greeks (and Americans) will soon learn how to earn a realistic wage once again.

  11. Yes, this pretty much sums it up. Particularly;

    “So it is frankly unbelievable that we should now be urging our neighbours to go for fiscal union. It is like seeing a driver heading full-tilt for a brick wall, and then telling them to hit the accelerator rather than the brake.”

    and

    “And all for what? To salvage the prestige of the European Project, and to spare the egos of those who were wrong”

    Politicians who admit they are wrong seem to be rather uncommon whereas politicians who get things wrong are very common indeed.

    Perhaps we should ask all these European politicians if they would like to share their neighbours debts?

  12. No, please Greek do not – with some 350 lousy tanks and a 180,000 men enlarged police force in the German arsenal (the rest of the our once proud army got scrapped for Euro-support and bountiful social welfare programs for knife-stabbing, cultural enriching new citizens preferably from the Muslim world) plus adipose and illiterate enlisted men plus socialist-style `Gutmenschen` (`do good`)-politicians and Mrs. Merkel as a supreme commander, the Greek army would most probably hoist the Hellenic flag over the Berlin `Reichstag` within less than 2 weeks.

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