The fate of the Eurozone is an excruciatingly slow reenactment of The Perils of Pauline. The latest beaming photo opportunity — as another emergency agreement was made last week and more than a score of European national leaders preeningly tried to appear relevant, if not exactly statesmanlike — will be as fleeting a source of comfort and celebration as its many predecessors. The idea of a tightly enforced injunction against any repetition of today’s debt-raddled impotence and chaos, without any suggestion of how to cure the current bout of the affliction, is nonsense. It is so even by the most otherworldly standards of the pandemic Europhoria that has for most of the life of the Eurodream prevented evil from being heard, seen, or spoken.
Last week, I wrote here hopefully of Germany’s imposing a regime in which countries in default would admit the fact, make the best deal they could, and Eurobonds, essentially on Germany’s credit, would be used to alleviate their fate, as long as they took an economic-growth pledge, including work incentives, entitlement reform, and labor-market-flexibility measures. Spanish unemployment is over 20 percent, and youth unemployment in that country is nearly 50 percent, because it is financially punitive to lay anyone off. I still believe in my beatific vision of last week, but still believe it will come in installments.
There is progress, as Germany is effectively taking fiscal control of the signatory countries. There are millions of Europeans who remember yet the echo of the hobnailed jackboots of the Nazi conquerors on the cobblestones of the old Continent. They rightly celebrated the end, with the European Union, of five centuries of squabbling over irredentist patches of territory between the principal European nationalities — Alsace-Lorraine, Silesia, Fiume, Savoy, Danzig, etc. — and endless dynastic and ethnic abrasions. Their stupefaction must now be considerable at delivering themselves into the arms of a benign but exigent German paymaster in the person of Chancellor Angela Merkel, a stout East German chemist and daughter of a Protestant clergyman, flush with Euromarks.
Under the soft-left, twinkle-in-the-eye ministrations of the Bill Clinton of Germany, former Social Democratic chancellor Gerhard Schroeder, the Germans reluctantly — but with Teutonic will that could have earned the kudos, if not the filmic enthusiasm, of Leni Riefenstahl — reformed German labor markets. And Frau Merkel has lightly but determinedly tinkered with the tax structure and fought for simplification, while pulling Germany’s deficit back to just over 1 percent of GDP (an eighth of American fiscal incontinence). By purposeful self-help, Germany now has an economy in which almost half of GDP is in exports, and most of that in very high quality engineered products, the fruit of the enviably diligent and capable German professional and executive elites and work force. In the last five years, German unemployment has declined from 9.6 to 5.5 percent. In today’s world economy, Germany, amazingly, now plays the strongest hand of any country, including China, which is slowing and stumbling with one leg stubbornly mired in the Third World of millennia of backwardness compounded by remnants of the Communist command economy.
France, a naturally rich and proverbially clever, if cynical, country, is the second power in Western Europe, but has accepted the trans-Rhine hegemon in order to ensure German money, via the European Central Bank, for the French private-sector banks that overinvested in debased Euro-sovereign debt. President Sarkozy has commendably increased the work week and the retirement age in the teeth of the usual caterwaulings of the devotees of the minimum-work state, and cut the deficit as a percentage of GDP back almost a quarter, to 5.8. But he has also raised the VAT (a value-added tax assessed largely — with the usual Euro-addiction to Orwellian Newspeak — on items and transactions in which no value has been added) and raised taxes on corporations, the wealthy, capital gains, and home sales.
In terminology widely emulated in Europe (as French style usually is), these are described as measures of “solidarity.” The “solidarity” consists in piling on to the productive sectors and groups of the economy the costs of the social safety hammock that is the Danegeld postwar Europe has paid organized labor and the small farmer. It is debt reduction achieved at the expense of economic growth by forcing productive society to pay more blackmail to the economy’s retardants.
Except for Ireland (which is staging a doughty recovery), Germany, Estonia, Finland, Malta, and Luxembourg, the Eurozone and even Britain (in the EU but not using the Euro) are all dancing to the same tune — though some other non-Eurozone EU countries (the Czechs, Slovaks, and Poles) are not.