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June 18, 2012 9:14 AM Euromess

By Ed Kilgore

Like many of you, no doubt, I followed yesterday’s Greek elections with considerable ambivalence. It was difficult not to sympathize with the anti-austerity forces. But we were all told repeatedly that their victory would mean a run on banks, a Greek departure from the eurozone, and then quite possible global economic chaos and recession. Wh needs that right now?

So Ezra Klein’s summary of the reaction—“The world breaths a sigh of Grelief”—at New Democracy’s apparent win (or more specifically, apparent positioning to create a pro-eurozone coalition with the PASOK and Democratic Left parties) wasn’t surprising.

As usual, Krugman supplied the big picture:

Greece, although not without sin, is mainly in trouble thanks to the arrogance of European officials, mostly from richer countries, who convinced themselves that they could make a single currency work without a single government. And these same officials have made the situation even worse by insisting, in the teeth of the evidence, that all the currency’s troubles were caused by irresponsible behavior on the part of those Southern Europeans, and that everything would work out if only people were willing to suffer some more.
Which brings us to Sunday’s Greek election, which ended up settling nothing. The governing coalition may have managed to stay in power, although even that’s not clear (the junior partner in the coalition is threatening to defect). But the Greeks can’t solve this crisis anyway.
The only way the euro might — might — be saved is if the Germans and the European Central Bank realize that they’re the ones who need to change their behavior, spending more and, yes, accepting higher inflation. If not — well, Greece will basically go down in history as the victim of other people’s hubris.

Which is why the most significant European election over the weekend might have actually occurred in France, per Reuters:

A resounding Socialist victory in weekend parliamentary elections will allow President Francois Holland to press ahead with reforms to tame France’s deficit and promote economic growth in Europe, a senior minister said on Monday.
The Socialists, who won a comfortable majority in Sunday’s parliamentary elections, will use a special session of parliament next month to axe tax breaks and increase taxes for large corporations, particularly banks and energy companies.
The measures are part of Hollande’s twin track drive to balance France’s budget by 2017 and persuade Europe’s paymaster Germany to back his call for a stimulus package of more than $100 billion to boost growth.

Should be an interesting euroweek.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • stormskies on June 18, 2012 9:48 AM:

    Yes, France has decided to invest IN IT'S PEOPLE. Oh my god. Now fucking what ? I can already hear the spin machines in the corporate media beginning the whirl of frothing frenzy at this horrible turn of events.

    Investing in it's people ...... what a radical communist plot ......

    oh my god ...

  • James M on June 18, 2012 9:55 AM:

    I certainly felt ambivalent. After having read Professor Krugman's columns I felt the Greek people would probably be better off leaving the Euro and reinstating the Drachma. However, given my current situation, I definitely didn't want the world economy to get any worse. So, from a selfish point of view, I am glad they stayed.

    However, whatever happens, the Greek people are in for years of hell.

  • Zorro on June 18, 2012 10:10 AM:

    It's worth noting that, if you wish to compare the Eurozone to the US- not a perfect comparison, I know, due to the lack of unitary governance- then you should also see that the US Federal government primarily works to transfer funds from northeastern + far western states to our poorer brethren in the southern ones. This is quite comparable to the notion that the Eurozone forces northern European countries- primarily Germany- to transfer funds to their poorer brethren in southern Europe- such as Greece + Portugal.

    The CAPTCHA for this post: itdomo-in-Chief. Not a bad term for German bankers, when one considers it.

    -Z

  • c u n d gulag on June 18, 2012 10:16 AM:

    And there's no lesson that was learned from tiny Iceland, which a few years ago was a colder version of Greece.

    Except that they said "FECK YOu!" to the banks and bankers, and are now on a solid rebound.

    I'm sort of glad, temporarily, that the Greeks decided not to overturn the apple-cart.

    If poo-poo's gonna hit the ventilator, I'd prefer Obama be in charge when it happens.

    Because if it happened now, Mill and the R's would all be a shoe-in's - and we'd all be toast faster - burnt toast, at that. Burnt austere toast.

  • jjm on June 18, 2012 10:16 AM:

    Yay for France! and I note that the UK is now opting for some stimulus rather than pure austerity.

  • boatboy_srq on June 18, 2012 10:22 AM:

    @Zorro - there was a NYT article a week or so ago about how Greek austerity was painful (even the once-revered archaeologists are feeling the pain) - and about how the Greek system was such a mess because revenue collection was difficult because there's a cultural disinclination to pay taxes. Applied to the US, that's a pretty fair assessment of how Dixie and the Teahadists operate.

  • Zorro on June 18, 2012 10:36 AM:

    @boatboy_srq: Indeed, there is a Dixie Disinclination to pay taxes. This does not, sadly, translate to a disinclination to take Dixie Dollar Disinclination.

    Federal dollars, that is,
    -Z

  • Barbara on June 18, 2012 10:37 AM:

    Honestly, based on the record of the last five years, it seems blisteringly easy to justify a seriously retrogressive tax on bank profits and any other number of bank related items -- transactions, etc. It might be reasonable for bankers to go all in for themselves but since when does society have to go all in for banks right along with them?

    Spain, clearly, should have let its banks default and so let Germany decide on its own whether the German banks that enabled the Spanish banks were worth saving in their own right.

  • John B. on June 18, 2012 11:17 AM:

    "As usual, Krugman supplied the big picture"

    For a really big picture, try this: the Greek election is just another signal that we are in the midst of a tectonic shift in the way the western world's society and economy are organized. Since the Peloponnesian Wars there have been a limited number of ways the world has been ruled. (1) Roman Imperialism (dictated by the strongest warrior-generals); (2) the Christian Era, (when society was organized by papal fiat from Rome); (3) the nation-state, (originally selected by royal heredity); and (4) democracy, (which in full flower gave an equal voice to all within the geographical borders of a nation-state).

    We are now at the threshold of a revolutionary new means for ordering and organizing human affairs: the international corporation including investment banks. The western world is being run not by clerical decisions, not by heredity, not by popular vote within defined geographical limits, but by select individual shareholders with engrossed private wealth.

    The controlling power in the Greek elections was... Germany's banks. Merkel and most other European 'heads of state' already are in bondage to them.

    The petulance already has infected -- and is busy destroying -- democracy in the U.S., too. Citizens United was just the latest invasive maneuver. What to call this new method of organizing western society?

    Welcome to World Servitude.

  • c u n d gulag on June 18, 2012 11:36 AM:

    John B,
    "World Serfin'!"

    'Serf's up!!!

  • TCinLA on June 18, 2012 1:12 PM:

    The EU was never anything but an expanded version of the Kaiser's World War I war aim of establishing the "Middle Europe Customs Union" with the economies of central Europe overwhelmed by the Germans. The Euro was never anything more than the modernization of the idea put forward by the Nazis to make the Reichsmark dominant in Europe by destroying the economies and money of the rest of the continent. Maybe now the rest of Europe will wake up to the fact that letting Germans equipped with briefcases instead of jackboots still doesn't make things work.

  • boatboy_srq on June 18, 2012 1:17 PM:

    @Zorro:

    Indeed. Now imagine, as a consequence of that, if Red states were required to pay their share of the federal programs inside their borders. The race to Banana Republic status would go from marathon- to NASCAR- speed in a heartbeat.

    The Reactionary fascination with the SUV becomes a lot clearer when you realise they don't think the federal government should be in the business of building roads.

    The difference with Greece is that productivity may be lower there than Germany, but the Greeks work longer hours, and the inefficiencies of their economic and political constructs never yielded this kind of mess when they were on the drachma. If Greece were governed like South Carolina they'd have been sunk decades ago.

    It's also worth noticing that the Greek and Irish fiascos are making things worse for everyone else. Spanish and Italian borrowing costs have spiraled upward, even though those economies are in nowhere near the shape of their smaller neighbors'. If the earlier woes had been patched up early on, the other, more stable economies wouldn't be feeling any pain right now; instead, we have otherwise healthy economies (especially Italy's) coming under pressure just because other Euro-conomies are in trouble.

    For any of the Reichwing that still talks up "austerity" as the way out, it would be useful to inquire, not whether the US follows Greece or Iceland, but whether it would be productive to let Mississippi or South Carolina fail just to keep Minnesota and Pennsylvania solvent. THAT is the dynamic that Europe faces, and that's the kind of math the US needs to start doing. Once the arithmetic gets to that level then we can see how much "austerity" the Reactionaries want.

  • exlibra on June 18, 2012 2:14 PM:

    Yesterday, from late afternoon to late evening, The Lede in NYTimes had a running commentary from all over the world, mostly on the impact of the Greek elections (Nikkei is up! Hopeful!) but also on the French ones. And it was amusing how clearly American economists (and not Krugman, either; we already know what he thinks) could see that the austerity -- combined with lack of revenue -- is killing European economy. If only they could say the same thing, as unequivocally, about *ours*.

    This whole austerity BS, here and in Europe, reminds me of an old joke about a carter who decided to train his horse to work without food. Every day, he cut the horse's ration by a little bit, and the horse kept pulling the cart -- the method worked like a charm, obviously. But, wouldn't you know it, the day before the carter was to reach the zero ration, the horse up and died...