The European mess

Published in Expansión

The European set-up of today, that is, the one represented by the Brussels-based bureaucratic mammoth, the unelected representatives of 500 million citizens, the nineteen sterile and increasingly pathetic anti-crisis summits and the sloppy political invention of the euro, that European organization is in deep trouble, shaken on top of its three unstable pillars: France, the country which used to be in command firmly decided to postpone the inevitable decline of its grandeur; Germany, economically mighty but subject to persuasion due to its guilty feeling regarding Nazism and WWII; and a bureaucracy which has proven to be voracious and sickly interventionist.

Let’s start with France. In one of those funny twists of History, our French neighbors now have their own ever-smiling President (Hollande), and the final outcome will be more or less the same as we had with ours (Zapatero). On the very same Sunday that the world only had eyes for the largely irrelevant Greek elections, the focus should have been instead on the French Congress and Senate elections, where the socialists won an overwhelming majority that will allow Hollande’s delirious economic program to bear its rotten fruit. This program, that might have well been created by the Duke of Wellington (France’s worst enemy at the time of Napoleon), is going to accelerate the France’s slow but constant economic decline and its collision course with Germany: tax rates up to 75%, increase in the number of public workers, “make layoffs so expensive to companies that it’s no worth it” and other nonsense in such a globalized and competitive world. A paradigm of Spanish socialists of all parties, France has run budget deficits for 40 years in a row and has suffered 15 consecutive years of loss of competitiveness: a true record. As with all records, this one will be beaten soon.

Germany has few incentives to guarantee the debts of countries which it does not trust. So far, being able to finance itself at a 1% interest rate for its 10 year bonds and enjoying a weaker euro so attractive to such an export oriented country, Germany is in no hurry at all to change the status quo. The Germans were first assured that Greece was the only problem (as contained as subprime mortgages), so a small amphibious assault with a tiny fund would solve it. Later, they were told that shock and awe aerial bombardment and heavy artillery fire were necessary, and the EFSM and other similar emergency funding entities were created. Then, they were advised to use the nuclear option to end the conflict, and soon enough one trillion euros were handed to banks for “liquidity” purposes (LTRO). Three months later, my goodness, just three, they were approached again to send a commando assault to end the resilient insurgency that kept messing around; this meant an additional 100 billion euros to save the Spanish financial system, “probably the most robust in the world”, according to our own ever-smiling former President Zapatero. A trillion here, a trillion there, and sooner than we think we might get into trouble – the Germans must have thought. Because this chain of events approaches the definition of auf den Arm nehmen, that is, pulling someone’s leg. In my view, it seems more rational for Germany to go back to the Deutsche Mark, rather than stay in the euro. The cost might be a bit higher, but it is rather quantifiable. On the other hand, the euro is a bottomless pit with uncertain result, with ever increasing amounts of good money thrown after bad. Therefore, I would advise our government against bluffing Germany as regards the euro. Moreover, this country has two politically independent bodies (something unheard of in Spain) with a say on the issue, and both should be watched very carefully: the still powerful Bundesbank and the Constitutional Court.

The third European pillar is the most worrisome. In order to achieve such beautiful agreements as a trade union and freedom of movements of people, goods and capital, you do not need either a huge bureaucracy apparatchik in Brussels and Strasbourg, nor a clumsy currency designed by politicians so that their political dreams can come true, nor a political union in which citizens are denied their say. Remember that a few years ago referendums were taking place all around Europe to approve the half buried European Constitution when they were abruptly called off as soon as the voting results did not match the wishes of the Orwellian European élite. But here come the euro-fundamentalists, whose fanaticism has always surprised me. For a panicked euro-fundamentalist no laws, treaties or democracies matter at all: they are the true personification of an end justifying its means. I feel unease having all these guys wandering around, obsessed with achieving their political dreams at any price and sacrificing at the altar of the god euro and the goddess Great Europe the rule of law, the liberty of its citizens, the rationality of its policies and the common sense. I used to think the Czech Republic’s President Vaclav Klaus was exaggerating when he famously said the EU resembled the USSR, but he seemed to be right. This Europe of Tolkien’s One Ring (“one ring to rule them all…”), increasingly disturbs me.

These unelected bureaucrats in charge of the EU, always unable of going one step ahead of events, are currently immersed in an obsessive war against an invisible enemy called “the markets”. Of course, it is not the markets by themselves which worry them, but the fact that they are free, difficult to manipulate, control or intimidate. What really upsets them is that markets do not obey them. It’s just a question of bad habits, I guess.

The euro meant for us, the Southern countries, a misappropriation of credit rating, an identity theft that allowed us to get into massive debt with interest rates levels way out of line with our track record. Today we are addicted to cheap debt and ask for more and more doses. Among the potential lenders and guarantors there shine the last four AAA, that endangered species. These drag their feet, unwilling to risk their credit rating and their future by bearing someone else’s burden. First they accepted mere promises; later, they asked for collateral; now, they will demand to take control of our accounts. They start to feel that a bird in the hand is worth two in the bush and defend the logic of binding responsibility and authority. Looks like an impeccable logic, I may add. That’s why I think Europe is definitely pushing us towards asking for a bailout – and taking the reins itself.

We beg the ECB to buy our debt with the standard speech for these occasions, that is, “temporarily, just until the situation stabilizes”. This solution, the easiest for politicians since time immemorial, has never ended well, is economically incorrect, morally wrong and discourages the structural reforms we desperately need. What Spain should do is to adjust its public expenditure to the sustainable levels of today’s reality – not the bubble’s, cutting the colossal squandering of our public sector and directly eliminating many regional and local entities. Our stunned Social-democrat government has specialized in haphazard tax hikes without touching the expenses’ side. They do not wish to adjust, because adjusting would mean to deeply modify the political and economic system brought about by 1978’s Constitution, whose flaws are impeding our recovery. The problem is that the main beneficiary of that system is the Establishment, both the political class and Unions, Inc.; therefore, they lack the incentive to bring in reforms. On the other side, the citizenship is powerless and helpless. Who knows? Maybe the much dreaded sovereignty-losing bailout, with all those Brussels bureaucrats coming in to take control, will achieve the necessary change.

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