David Calling

The David Pryce-Jones blog.

The Eurozone’s Greek Tragedy


The crisis question right now is: What’s going to happen about the euro? This is the common currency that sixteen European countries adopted after scrapping their national currencies a decade ago. People warned at the time that one interest rate didn’t fit different economies, and worse still, there was no state to back the currency up as a lender of last resort. But a handful of politicians were determined to push ahead at all costs, evidently in the belief that the common currency was bound to lead to a single European state.

Spain, Portugal, and Ireland are among the countries that treated the euro as an excuse to spend money they didn’t have. Presumably the expectation was that the other eurozone countries would act as the rich uncle and bail them out. Greece is the supreme basket-case. Its debt is so high that conventional borrowing through the issue of government bonds cannot pay it off. The logic of its position is to default. Then it should leave the eurozone, issue its former currency of the drachma, devalue, and so stimulate employment and trade.

The handful of politico-fanatics who monopolise the European Union can’t possibly allow anything of the kind to happen, because that would put paid to their dreams of a European super-power. So they are laying down the law for the Greeks, cutting the country’s expenditure and raising its taxes. Greeks are being told that they are too profligate and incompetent to run themselves. Commentators are saying that Greece is being turned from a sovereign state into an economic protectorate. What humiliation, what an authoritarian exercise! It’s never going to work. The Greeks are prone to dangerous fire-raising rioting, and in the face of austerity and mass unemployment imposed by foreigners there will be mounting resentment culminating in strikes and violence.

The only alternative is for Germany, the one eurozone country that really works, to pick up the bill for the Greeks. In other words, fulfilling the role of lender of last resort. Why ever should Germans pay for others to give themselves a good time at their expense? Besides, if they pay for the Greeks, the Spaniards, Portuguese, Irish, and all the rest will come asking for a similar favor. Treated as suckers, the Germans will also take to the streets, with every excuse for turning violent.

Thoughtful people have long predicted that the eurozone was an unfounded and rash experiment pretty well certain to break up in just this way. The politico-fanatics are unable to admit that they have pursued policies harmful to Europe, and will fight to the bitter end for the privilege of being wrong. The lesson is going to be more painful than it need have been. The Greeks will be the first to go through the fire, but the others will soon be following.


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