What is now happening in Europe isn't so much a crisis as it is an exposure: a Madoff-type event rather than a Lehman one. The shock is that it's a shock. Greece was never going to be bailed out and will, sooner or later, default. The banks holding Greek debt will, sooner or later, be recapitalized. The recapitalization will be borne by German taxpayers, and it will bring them—sooner rather than later—to the outer limit of their forbearance. The Chinese will not ride to the rescue: They know not to throw good money after bad ....Man, that's harsh.
What comes next is the explosion of the European project. Given what European leaders have made of that project over the past 30-odd years, it's not an altogether bad thing. But it will come at a massive cost. The riots of Athens will become those of Milan, Madrid and Marseilles. Parties of the fringe will gain greater sway. Border checkpoints will return. Currencies will be resurrected, then devalued. Countries will choose decay over reform. It's a long, likely parade of horribles.
Tuesday, September 20, 2011
What Comes After 'Europe'?
From Bret Stephens, at Wall Street Journal:
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Politicians are unable to see beyond the next election; welfare recipients are concerned only with their next handout. Unionized public workers are riding taxpayers into the ground. Unionized private sector workers are riding businesses into the ground. The same thing is happening in Europe.
Here in Portugal, the government raised the Value Added Tax on energy and many other necessities to 23%, starting at the beginning of this month. This will have a crippling effect on everyone, from individual apartment-dwellers to business owners. The last thing the economy needed was more downward pressure, but that's where southern Europe is - unwilling to face spending cuts, and trusting in the proven failure of increased taxes. Productive Euro countries - like Germany - are fed up with being the only ones sacrificing. Germans work more years and wait longer for pensions than citizens of any of the nations they're bailing out, and they're about to take their frustrations out on Merkel. Nationalist sentiment is also rising in France, fueled in part by an Islamic population that is trying to enforce its mores on a secular society. It never made sense that nations with divergent interests, histories, languages, work ethics, and religions could form a union. I don't know why anyone's surprised that the EU is on the verge of collapse.
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