The Divided States of Europe

[Xavier Lang]

http://www.stratfor.com/weekly/20110627-divided-states-europe?utm_source=freelist-f&utm_medium=email&utm_campaign=20110628&utm_term=gweekly&utm_content=readmore

I'm curious how those of you actually in Europe see things and whether you feel this is an accurate summary of what is going on or not.

[The Winslow]

Comments as they go:

Geography is not the only factor for national fragmentation. The "balance of powers" politics that went from the Renaissance to World War II are also responsible for it, with great powers organizing coalitions every time one of them seemed powerful enough to militarily conquer the rest. This was especially apparent with Britain vs. France in the Napoleon era.

Nationalism also appeared in Europe, which is a force that both united countries but fragmented the continent. Originally it was a way to free the populations from feudalism; switching people's loyalty from their sovereign to their country and transforming government legitimacy from being based on birthright to being subjected to the will of the people. But it created all sorts of us-vs.-them notions. Before, no one objected to stuff like Poland having a French king, or Spain a German king, that kind of things. After, it changed.


There is one huge difference between the EU as it is and the proto United States. The Confederation had no monetary control over the member states. And once the USA were formed, the Federal Bank was firmly in the control of the government. In the EU, it's different -- the European Central Bank is controlled exclusively by itself, which is to say by Goldman Sachs and similar, and it is in control of the European countries rather than the other way around. This is a counter-nature arrangement that allows international finance companies to pillage the wealth of the whole continent. The Greek crisis is a perfect example of that. The Greek debt was engineered by them, so that they could profit from speculating against it. Any attempt at solving the crisis is subject to the whims of international organizations such as the ISDA (https://secure.wikimedia.org/wikipedia/en/wiki/International_Swaps_and_Derivatives_Association), which recognizes no authority over itself. Trichet's successor at the ECB is going to be one of the Goldman Sachs architects of the Greek debt (https://secure.wikimedia.org/wikipedia/en/wiki/Mario_Draghi). That should say everything that needs to be said.

Greece is perfectly right to refuse the austerity plans that its puppet government are trying to pass. They'd never work anyway; you can't pay your debts by crippling your economy. What would be really needed to solve the financial crisis in Europe would be, basically, to heed the Icelanders' wisdom and tell banks to go fuck themselves. If the countries need money, they could start taxing financial transactions and excessive wealth. But that's never going to happen, because it would be in the interest of the majority of the population rather than in the tiny handful of people who actually matter.

The EU's worst failing is that it is designed to destroy democracy and replace it with bureaucracy. The European Parliament is a joke -- a Parliament that can't legislate? Really? What is even the point then? The authority is instead entirely put in the hands of people who are appointed rather than elected. The Commission, the Council of the Union, the Court of Justice, the Central Bank... All of those things are guaranteed democracy-free. How do you want such a setup to work? Of course it'll fail. It can only fail. And failing is the best thing it can do for its own sake, as that would possibly allow rebuilding on saner bases.

Do anyone remember that when the euro was introduced, it was struggling to get parity with the dollar? For the last few years, it has been flying high, remaining consistently at least 30% higher than the dollar, sometimes going as far as 60%. How does it make sense when domestic industries are struggling to withstand competition with importations (especially from China, which keeps its yuan severely undervalued for that reason) and unemployment rates are extremely high? Why is an economic zone in crisis keeping an overvalued currency? Because economic policies are dictated by what "the markets" want rather than what would serve domestic economies.


Overall, the article is accurate IMO. It just doesn't delve in the socio-political roots of the problem.

[Dacke]

I pretty much agree with all that Winslow said above.

[Xavier Lang]

Thanks! I appreciate the extra information.

[Name Lips]

From what I understand the previous Greek administration was cooking the books -- outright lying about the financial straights their country was in.

It turned out that their generous social system was funded almost entirely from debt, and that debt was rapidly catching up with them.

I don't know if the austerity measures will work, but I do know it isn't fair to keep things the way they are. Greece can't depend on wealthier nations to just give them money to balance their books.

Telling the creditors to go fuck themselves would essentially amount to a loan default, which would have far-reaching implications. I'm not really sure what the real consequences of that would be either. A lot of people own Greek debt now, and it's not just banksters. It's all the nations that have been bailing them out.

In my mind, the problem at the beginning was unfunded social programs. Politicians eventually figure out the magic combination to get elected -- they promise to give more stuff to the people and to lower taxes. Then the government ends up with a lot of expensive social programs and no way to fund them. So they resort to borrowing money.

Which is a viscous cycle because since the people aren't paying for the programs, they actually look free. They don't get used to the idea that these programs carry a real cost that, one way or another, they will have to pay.

These costs are pushed far enough to the future that the politicians can safely ignore them. Their terms will have expired by then. They'll leave it to future generations of politicians to discover and deal with the extent of the problem (and to bear the brunt of public anger).

[The Winslow]

From what I understand the previous Greek administration was cooking the books -- outright lying about the financial straights their country was in.

With the help of a certain company called GS who told them how to cook the books convincingly and helped them make it seem more legit, while at the same time speculating on the inevitable fault.


Building over debt isn't a problem. All you need is a controlled inflation. High enough to make the debts shrink swiftly overtime, but not so high that your currency becomes entirely worthless.

The ECB is against monetary inflation, though. Its one and only mandate is to keep it below 2%. It has no other commitments.

Austerity plans are reverse Keynesianism. It's about removing money from the economy and expecting it to go better. The only way a nation subjected to an austerity plan can hope to repay its debt is by selling off its heritage. That's like telling someone who's deeply indebted that he should quit his job so as to save money on commuting. And sell his car to save on insurance. And sell his suits to save on laundry. And sell the whole house and move in a cardboard box. Becoming a hobo is a sure-fire way to repay your debts, no problem!

And social programs aren't the problem anyway. European nation states are spending a lot more of their budget on tax reductions for the corporations and the wealthy than on social programs. They're also wasting a ton of money on extremely bad management, generally of the principle that by not paying for a stitch in time, you save money and who cares if it'll cost a lot more to pay for nine stitches later since it'll be your successor's problem. Who'll just adopt the same approach anyway, until the country is left naked.

[Janos]

They're also wasting a ton of money on extremely bad management, generally of the principle that by not paying for a stitch in time, you save money and who cares if it'll cost a lot more to pay for nine stitches later since it'll be your successor's problem. Who'll just adopt the same approach anyway, until the country is left naked.

European States are hardly the only ones taking that route. It's a huge problem for the US, Mexico, and many other nations. It seems to be a significant flaw in Democracy that no state has found a good way to counter yet.

[Aloysius]

European States are hardly the only ones taking that route. It's a huge problem for the US, Mexico, and many other nations. It seems to be a significant flaw in Democracy that no state has found a good way to counter yet.
It happens in other kind of government, so it's not something specific to democracy. And, even among democracies, it does not happen on the same level. Compare Norway and Italy (is that a democracy ? well, replace it with Spain !), Finland and Tennessee... It's probably related with both citizens and politicians education and political integrity. When you are ready to vote for a corrupt leader because "well, that's the proof he is smart and who would not do the same", you end up with this kind of problem as well.

[Janos]

When you are ready to vote for a corrupt leader because "well, that's the proof he is smart and who would not do the same", you end up with this kind of problem as well.

I do think it's a problem more for Democracy than other forms of government because in all other forms of government the people in charge ARE the state, vs. trying to get as much out of the state as they can before they leave.

You'll see the same pattern in a dictator on his way out, but not necessarily from the very begining of his reign. The elected/easily replaceable nature of figures of State in a Democracy passively encourage short-term thinking by rewarding immediate results in election polls, re-election, and visible results.

[Hatter]

Just like CEOs of big corporations! Short term gain > long term success.

[Name Lips]

European States are hardly the only ones taking that route. It's a huge problem for the US, Mexico, and many other nations. It seems to be a significant flaw in Democracy that no state has found a good way to counter yet.

If you want a government to think long-term, you need a long-term government. Dynastic empires were good at this. Lifetime monarchies were pretty good at it. But if you got stuck with a bad ruler, you were stuck for a long time. Term-limit democracies are very poor at long-term thinking, but you are only stuck with bad leaders for a brief time. You also only get good leaders for a short time...

[The Winslow]

I think the issue can be solved by something like a tricameral system (instead of bicameral); or bicameral (instead of monocameral). Basically, have a bunch of guys who have very long terms but whose only power is to veto or challenge the rest of the government. And on the flipside, in case of crisis, they are considered responsible for not having been proper watchdogs which can land them in jail.

[Enk]

If you want a government to think long-term, you need a long-term government. Dynastic empires were good at this. Lifetime monarchies were pretty good at it. But if you got stuck with a bad ruler, you were stuck for a long time. Term-limit democracies are very poor at long-term thinking, but you are only stuck with bad leaders for a brief time. You also only get good leaders for a short time...

The British system (where the bureaucracy outlives and in some ways out-powers the elected officials) is a nice hybrid.

[Janos]

But if you got stuck with a bad ruler, you were stuck for a long time. Term-limit democracies are very poor at long-term thinking, but you are only stuck with bad leaders for a brief time. You also only get good leaders for a short time...

How would you define a good leader conceptually?

For me, it requires having a vision and the follow-through and ability to implement that vision. And in defining vision, I think it has to account for the long-term.

So I find the concept of "Good Leaders for a Short-Time" somewhat oxymoronic because you can't easily demonstrate good leadership in a short-time (baring an extrodinary crisis). If you have a long-term vision, you're not going to be able to do much, achieve much, get credit, or really succeed with short terms. So many leaders start chopping that vision up into manageable pieces, but those pieces are never the same thing. And then that same leader has to stop planning to get re-elected halfway through accomplishing anything significant.

I think I'd brought this idea up before, but I would like to see a system of single term, longer in office Democracy. Probably a 6-10 year term limit. Something would also need to be done about the party system and political legacies, but that'd be the start of encouraging longer term leadership.

[bondetamp]

I do think it's a problem more for Democracy than other forms of government because in all other forms of government the people in charge ARE the state, vs. trying to get as much out of the state as they can before they leave.

You'll see the same pattern in a dictator on his way out, but not necessarily from the very begining of his reign. The elected/easily replaceable nature of figures of State in a Democracy passively encourage short-term thinking by rewarding immediate results in election polls, re-election, and visible results.

Wow.

There have been some crappy, crappy democratic leaders through the ages, but none that came even close to the likes of Nicolae Ceaușescu, Pol Pot or Kim Il Sung, not to speak of Stalin or Hitler.

While there may be examples of good dictators that were better than some of the worst elected leaders, this is certainly not the rule.

[shiningbrow]

I was watching the BBC on public television last night when the reporter interviewed a Greek-American professor from the University of Maryland. I can't find a link to it, but his opinion was that the Greeks should go back to using the Drachma, allowing the currency to adjust to market conditions. With a cheaper Drachma, the now cheaper currency would reduce their debt payments, relative to the Euro, and make exports attractive to other countries, thus boosting the economy. This seemed odd, but eminently sensible. I'd not heard this idea advanced elsewhere and so I'm doubly frustrated not to be able to find more specific links. Not easy to find on BBC website. If I do find it I'll post the link.

[The Winslow]

Problem is, their debt isn't in drachmas, so they'd increase it by going back to the drachma and devaluating. They would also be instantly attacked by financial vultures (like they already are, but worse) through speculation that would cause investors to abandon the country.

No, what's needed is to have the EU bail the country out (and get ready to do so for the next few countries to need it) as a whole, cohesive, unified economic zone that it claims to be. And then redynamize the economy of the union as a whole by devaluating the euro.

[Janos]

While there may be examples of good dictators that were better than some of the worst elected leaders, this is certainly not the rule.

Hitler, Stalin, etc. all had other problems that made them bad leaders, but many of them did have long-term planning. They just violated universal civil rights, oppressed people, and otherwise harmed their people to do.

That's not a worthwhile trade. But they had vision. There has to be a balance between massive tyranny and lack of vision or long-term purpose.

[shiningbrow]

Problem is, their debt isn't in drachmas, so they'd increase it by going back to the drachma and devaluating. They would also be instantly attacked by financial vultures (like they already are, but worse) through speculation that would cause investors to abandon the country.

No, what's needed is to have the EU bail the country out (and get ready to do so for the next few countries to need it) as a whole, cohesive, unified economic zone that it claims to be. And then redynamize the economy of the union as a whole by devaluating the euro.

I'm not entirely sure that Greece could not make accepting their currency in a more favorable valuation as a condition of not defaulting. They do have this option as a negotiating point, no?

I have a friend who used to run a business in Athens, and he constantly complained about the poor work ethic that many Greeks had. You have this hard working prosperous north propping up these poorer, weaker southern economies. The interdependence of the entire economic system with the shared currency renders everyone vulnerable unless each participating nation adopts the same basic values regarding work, productivity and social welfare.

[The Winslow]

And taxes.

[Edena_of_Neith]

And rules, and a strong, central government to enforce those rules.

Heck, even in a game - such as Chess - it is appreciated that without rules, you have no game.
Bishops move diagonally. Bishops do not move up or down, right or left, but diagonally. Bishops may move as far as they wish, as long as a piece is not in the way. Bishops are not limited to moving one space only, like the King is. Bishops may ... (continues reading the rules on what Chess Bishops can and cannot do, like they were the Holy Hand Grenades from Monty Python's Quest For the Holy Grail.)

Well, Greece may not say: Now, we shall use the new system, to get back at the Germans for World War II.
Greece may not say: We are going to take the Germans for a ride.
Greece may not say: The rules apply to France, but not to us.
(Continues reading the rules for Greece, as if Greece was the Holy Hand Grenade.)

Problem is, there is no strong central government, with an army, to enforce the rules.
No rules, no European Union.
No rules, no Common European Zone.
No rules, no European Monetary Zone.

Just the mess that is.

Is there a good answer?

Well, the last time Europe was truly united, it was under Imperial Rome, under the boot of the tyrannical Romans, who enslaved everyone and turned Europe into a giant slave plantation, and imposed Latin as the one language (although the effort failed, in the end.)
The Mongols almost unified Europe, in the Book of the Dead. The death of their leader, at the last moment, saved Europe from Asia's fate.
We have seen World War I and World War II.
In 1961, Kennedy almost united Europe in the Book of the Dead with the Cuban Missile Crisis.

Personally, I don't think any of those, were good answers.

And hey, there is no reason, that I can see, why Europe cannot have it's various peoples, cultures, languages, and beliefs, and each of them be sovereign and independent.
Germany can be Germany, France France, Greece Greece. Nothing wrong with that.

If nobody is willing to abide by the rules ... and the European Parliament is helpless, in any case, to enforce any rules ... then why not simply have a Europe with it's many different, diverse, cultures, languages, beliefs, and creeds?
That's how it has been for thousands of years, and as far as I can see it is the way it will continue to be.

We would not demand that Winslow and the French, abide by American Law and American Rule, under a Republican Government that likes of which, would make Rush Limbaugh proud.
So why should the Winslow and France, have to do what Germany tells them, or abide by German law, rules, and customs? Or vice versa.

I do not believe they should.

[Andreas]

If nobody is willing to abide by the rules ... and the European Parliament is helpless, in any case, to enforce any rules ... then why not simply have a Europe with it's many different, diverse, cultures, languages, beliefs, and creeds?
That's how it has been for thousands of years, and as far as I can see it is the way it will continue to be.

Dude, have you seen how much wars we manage to cram into 2000 years?

One of the main reasons the EU was created was to end wars against one another and to be better able to handle other global players (like Russia, USA, China, ...).

Problem is, without a united foreign, military and financial politic it was doomed to fail.

One solution i would like to see implemented is that for every violation (against the financial rules and so forth, or if you need a bailout) you have to give up a little bit of sovereignty to the EU.

E.g. greek can has its bailout, but its foreign affairs are now solely manged by the EU.

[Edena_of_Neith]

From what I'm hearing, it's not just Greece that is breaking the rules.
I'm hearing that every poorer country in the EU, is exploiting the rules, at the expense of the wealthier core countries in the Union.
And I'm hearing those core, wealthier countries, are suddenly not so wealthy, not so prosperous, anymore, as their wealth is redistributed away.

If I was a Frenchmen in France, or a German in Germany, I would be (rightfully) outraged at the exploitation my country was suffering, so that other countries could engage in massive deficit spending.

Even here in the United States of America, there is widespread outrage in many of our states (the equivalent of territories in most countries) at the huge deficits being run up by certain of our states.
For example, California is a state running an enormous deficit, and they want all the rest of us to pay for their economic disaster, and the federal government is all too willing to redistribute the wealth in this way, and ... the Republican Party (the party of George Bush and Rush Limbaugh, mind you) may just win a historic landslide victory, next year, over this, and things like this.

I just think that everyone should play by the rules.
If Greece, or any other nation, wants the benefits of the European Union, they should abide by the rules of the European Union.

However, Greece (and our California ...) think that such things as rules do not apply to them, apparently.
They can do as they please, and still have all the benefits of the system.

It doesn't work that way. They may believe it works that way, but it does not. (If Germany abandons the Euro, and returns to the Deutchmark, then I will be proven right, and decades of effort and hard work will be down the drain, because some people thought no rules applied to them.)

EDIT: And you know full well that Greece will not surrender any of it's sovereignty, that they will laugh in the face of the European Parliament, and they will otherwise do as they please. If you are angry over this, I won't blame you.

[The Winslow]

Edena, there is a big problem with following the rules when one of the rules says this: "the rules can be changed at any moment on the behalf of self-interested people who can not be considered liable for any problem they may cause to you".

One solution i would like to see implemented is that for every violation (against the financial rules and so forth, or if you need a bailout) you have to give up a little bit of sovereignty to the EU.

Very, very, very bad idea.

First, it makes transfer of sovereignty from the national to the supranational a sanction, and therefore a humiliation against the people of the concerned country. When building something like the European Union I'd want to see, such transfers should be seen instead as a natural evolution.

Secondly, the main problem with the EU as it stands right now is a lack of democracy in most of its institutions. Loss of sovereignty therefore becomes synonym to loss of democracy. Thorough reforms at the EU level should be made before any such scheme can be even thought about. A democratic EU would mean that sovereignty transfer would result in putting power back to the people; rather than taking it away from them.

Your solution would only result in nations going "fuck you, I quit". Not in slowly changing the national identity into a continental identity.

[Edena_of_Neith]

Edena, there is a big problem with following the rules when one of the rules says this: "the rules can be changed at any moment on the behalf of self-interested people who can not be considered liable for any problem they may cause to you".

Agreed.
That's no rule at all.
That's a rule that says 'there are no rules.' : (

[The Winslow]

That's worse than a rule that says there is no rule.

[Edena_of_Neith]

That's worse than a rule that says there is no rule.

I agree. It's just ... a lousy situation.