The Euro and us / Europe’s woes a warning (NEW YORK POST OP-ED) JOHN BOLTON 06/20/12)
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For America, as for Europe, the consequences of Sunday’s elections in
Greece and France are likely to be profound. Voters in the two
Eurozone countries not only charted their own near-term political
futures, but provided lessons for US voters in our rapidly
approaching November contests.
Greece’s center-right New Democracy Party under Antonis Samaris
squeaked out a narrow plurality, beating the radical-left Syriza
Party by under 3 percentage points. Because New Democracy didn’t win
a majority, it will have to partner with the Socialist Party, whose
policies are largely responsible for Greece’s parlous economic
condition. Syriza rejected Samaris’ call for a “government of
national salvation,” thus positioning itself to replace him should he
France’s results are even more depressing. Newly-inaugurated
President Francois Hollande’s Socialist Party won a majority in the
National Assembly to match its control of the Senate — giving
Hollande undisputed political primacy in France. He seems determined
to pursue further policies of economic ruination; his campaign
promises included raising top income-tax rates to 75 percent and
actually reducing the retirement age for many workers from 62 to 60.
International financial markets, first cheered by Greece’s results,
quickly turned grim, with Spanish and Italian bonds coming under
pressure. Ironically, the only good news was that China, Russia,
Brazil, India and South Africa increased their contributions to the
International Monetary Fund to aid Europe.
The amount they offered ($75 billion) is paltry given the magnitude
of the crisis, but even the gesture — nations we used to
call “developing” helping to bail out “advanced” countries — showed
Europe’s world turning upside down.
German Chancellor Angela Merkel is the only European leader with a
clear answer. Yet even with the clout afforded by Germany’s strong
economy, it will likely prove too controversial and too hard to
achieve to stop Europe’s rush toward the financial (and perhaps
Merkel acknowledges at least implicitly Europe’s folly in creating a
currency without a government, centering monetary but not fiscal
policy in Brussels. Her answer is to finish the job, and move fiscal
policy largely out of the hands of nation states to Brussels.
Good luck with that. Mere citizens in Europe, perhaps most especially
the Germans, have never been enamored of the “European project,”
imposed upon them by their elites. Centralizing even more power in
Brussels hardly seems in their interests, however much economic sense
it makes to some theorists.
Thus, while Chancellor Merkel’s logic may be impeccable from her
perspective, it is politically unpopular, and in any event not doable
in a realistic timeframe to avert the ongoing tsunami of financial
Accordingly, another “corner” solution is the most feasible
alternative — namely one or more countries, starting with Greece,
exiting the Euro and readopting national currencies.
The Euro’s true believers argue that leaving it will be catastrophic —
but compared to what? Today’s situation is already catastrophic in
Greece, nearly so in Portugal and imminently threatens Spain and
Exiting the Eurozone means devaluation, which is no doubt painful —
but which, as Iceland has recently proven, is ultimately sound
medicine for a long history of irresponsible government spending and
Still, Europe needs leaders willing to state the obvious. Either more
centralization or fragmentation are likelier to address the Euro’s
basic contradictions than continuing to “muddle through,” as Eurozone
leaders have been doing for two years. Greece’s Samaris, realistic
enough to know that denial is not an option, may be such a leader.
Hollande is another story — seemingly commited to policies that will
add France to the list of Europe’s walking wounded. If that happens,
there is little doubt the Eurozone will be radically restructured
into something essentially unrecognizable from today.
For the United States, the stakes are high and time is short.
Although the costs to the mistaken Eurozone countries have been
enormous, they at least foreshadow what will happen to others who
repeat their mistakes.
We can, as one alternative, choose a second term for President Obama
in which he blithely adds even more to our already massive deficits,
thus moving along the Greek and Spanish paths. Or we can turn away
before it is too late.
Pursuing the Mitt Romney/Paul Ryan budget strategy won’t guarantee a
complete and instant recovery, but re-electing Obama will certainly
guarantee the opposite. (Copyright 2012 NYP Holdings, Inc. 06/20/12)
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