EUROPHRENIA
by G. Lira
According to the dictionary, schizophrenia is “a long-term mental disorder of a type involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception, inappropriate actions and feelings, withdrawal from reality and personal relationships into fantasy and delusion, and a sense of mental fragmentation.”
In Europe, they’re having the same thing—only writ large: It’s not that the political/financial leadership of Europe is at odds with the people—it’s that they’re two minds locked in a single body, struggling for control.In the one hemisphere of this divided brain, the political/financial leadership is convinced the European Union is something devoutly to be wished—no matter what the costs, no matter what fortune and the people throw up in opposition.
In the other hemisphere of the europhrenic brain, the people of Europe overwhelmingly do not want integretation “at all costs”. In some parts (a lot of parts) of Europe, they don’t want integration at all.
Now, like a lot of schizophrenics, europhrenia has been latent over the past dozen years—since the 1999 monetary union, as a matter of fact—because everything’s been going great guns.
This is natural—and completely predictable: You ever see a schiphrenic have a break-down when he’s happy, high, and just got laid? No you do not—he only has his little “episode” when he’s stressed.
Same with europhrenia: Everything was copacetic between 1999 and 2008—though there were signs of the disease. In fact, lots of unmistakable signs of europhrenia:
• No country ever voted for monetary union—ever. European monetary integration only ever happened by either government diktat or the legislature overriding the will of the people.
• Switzerland is not a eurozone member because, although the political leadership rather desperately wanted in on the union, legally the only way to do such a monetary union is through a Swiss-wide referendum—and the Swiss political leadership knew that they would lose any such referendum.
• In the nations where the European Constitution was put to a vote in 2005—Spain, France, Holland, Luxembourg—the results were so embarrassing that the other countries retreated on a referendum. In Spain, the Yes vote won—but in the lowest voter turn-out in Spain ever—while in France and Holland, the Constitution lost by resounding margins. And this was back in 2005, when everything was booming. In the end, rather than face the electorate, the European Constitution was superceded by the Treaty of Lisbon—a work-around that short-circuited the democratic process, and got the European leadership what it wanted.
These examples are to emphasize one and the same thing:
The people of Europe never wanted total European integration, not even in the best of times—whereas the European leadership adamantaly insisted upon it.
Now, we are no longer basking in the golden glow of good times: On the contrary, Europe is facing a nasty solvency crisis.
The basic problem of the current crisis is, countries of the European periphery—Greece, Ireland, Portugal, Spain, Italy—took on too much cheap debt from banks in the core eurozone countries—France, Germany and Holland—and now are unable to pay for it. It’s not more complicated than that.
(One could argue that the reason the European nations overspent was that the leaders were basically bribing the people with a false sense of affluence, bought and paid for via debt, so that they would acquiesce to the European Union and the eurozone. But that’s for another post.)
There are five ways to get over an unpayable sovereign debt:
1. Default on the debt.
2. Restructure the debt, with both sides making sacrifices.
3. Inflate the currency, as the United States is currently doing.
4. Lend more money in the form of “bailouts”, which is essentially kicking the can down the road.
5. Or squeeze blood from a stone—i.e., impose austerity measures.
Option #1—default—helps no one, and wrecks economies in the short term. Option #3—inflating the currency—is a bad idea for the euro, as it is too young a currency—if the ECB starts really inflating, there might well be a panic out of the euro. Option #4—lending more money—is just postponing the day of reckoning, while adding more to the debt burden. And Option #5—austerity measures—cripples an economy by leaving it too weak to grow its way out of the solvency jam that it’s in.
The sensible thing, of course, would be Option #2: Restructure the debts of these countries, much like during the Latin American debt crisis in the early ‘80s, whereby everyone shares the pain, equally. Banks and other creditors take haircuts, countries are put on a fixed payment schedule and reduced credit availability: Everybody takes a hit, but nobody gets killed. Everybody moves on—bruised but otherwise okay.
Has the political and economic leadership of Europe chosen the sensible approach?
Can PIIGS fly?
The political and economic leadership of Europe has collectively chosen Options #4 and #5: They are lending more money to the insolvent nations—Portugal, Italy, Ireland, Greece and Spain—thereby adding more debt to their burden. And they are imposing austerity measures on the politically weaker countries, specifically Greece and Ireland now—but Spain, Portugal and Italy soon enough.
More loans via bailouts are of no help—they just kick the can down the road, while simultaneously making that can bigger.
Austerity measures naturally hurt an economy by slowing it down—and a slowing economy creates a whole host of problems: Unemployment, poverty among the elderly and the young, generalized discontent, all the rest of it.
But the leadership of Europe seems unperturbed: They’re going hell-bent-for-leather in the direction of bailouts and austerity—which seems strange: It would be a bit like giving an addict both more heroin and insisting he go cold turkey—I mean, make up your mind, right?
So why is the political and economic leadership of Europe insisting on both more loans and more austerity? Why, simplicity itself:
In the current eurozone crisis, the leadership class in Europe has identified the well-being of the banks with their own well-being—to the detriment of the well-being of the Continent, and of the people of Europe.
There’s that old saying in finance, “If you owe a bank a million dollars, that’s your problem—but if you owe the bank a billion, that’s theirs.” That saying applies infinitely more so to this situation.
The sovereign insolvency of the European countries is a mortal threat to the banks of Europe.
From the banks’ perspective, what would they want the PIIGS to do? Why, to either take on more loans in order to pay off the older loans. And when that doesn’t work, then start the PIIGS on austerity programs and simultaneously push them into selling national assets to pay off the debts to the banks.
Which is exactly what the European leadership has been doing: Giving more loans to the teetering countries, while pushing Greece and Ireland into austerity.
In fact, since the start of the Global Financial Crisis, everything that the European leadership has been doing has been in service of the welfare of the banks—not the welfare of the people. The bailouts of the banks—the bailouts of the sovereign nations—the austerity measures—all of it: It has been to help the banks as an end in itself. To the detriment of the people.
Need examples? Why, we’ve got examples galore!
• Brian Cowen, Ireland: In September of 2008, in the depths of the Global Financial Crisis—unprovoked—he went out and guaranteed the Irish banks’ liabilities. Ireland as a nation is broke because of this decision—a needless decision, because at the time, the Irish state was fully funded, thank you very much. But when Prime Minister Cowen made this terrible decision, he essentially socialized the losses of the banks. That’s why Ireland is on the Critical Care list—and why the IMF and the ECB have crammed down austerity measures and more loans.
• Angela Merkel, Germany: She bailed out the Landesbanken—the State-owned savings banks, which had made some horrendous decisions in the run-up to 2008—and then has pushed for their loans to the PIIGS to be made whole. So essentially, by refusing to renegotiate thus far, Merkel has actually forced herself into the position of providing the PIIGS with more bailouts. Naturally: If Germany won’t renegotiate and doesn’t provide more loans, then all that’s left is bankruptcy—and an even bigger loss at the end of the day.
• Dominique Straus-Kahn, International Monetary Fund: DSK wasn’t a paladin cut down by his willie—he was an Establishment figure, and the policies he was implementing in the IMF with regards to Greece and the other PIIGS weren’t long-term, permanent solutions: All DSK was doing was negotiating more loans for the insolvent countries, more bailouts—in other words, he was trucking in temporary fixes, just kicking the can down the road for a bit. Why? Because he had his eye on the French presidency: He wasn’t about to go to the French banks (which have enormous exposure to the PIIGS) and cram down a forced haircut on their loans. Forced haircuts might be the way out of this crisis—but that would have antagonized a very key base of DSK’s support: The French money men. So don’t weep over DSK as if he were some fallen hero—because he wasn’t. He’s just a loser who couldn’t control his pecker.
(While we’re at it: I don’t for a second buy into the notion that DSK was set up. The fact that his lawyer almost instantly floated the trial balloon that it was consensual sex erases any possibility that it was a frame job. And I call bullshit on any notion that this West African maid was a honey pot—Laetitia Casta she ain’t. Bottom-line, nobody torpedoed DSK—he did it all on his lonesome, by showing unbelievably bad jusdgment.)
• Christine Lagarde, France: This teetotalling, brussel-sprout-munching, yoga-instructing bitch refused to budge on the 3% capitalization rule at Basel III—she claimed that requiring banks to put up more Tier 1 capital would choke off growth. So naturally, with a mere 3% cushion, any hit a French bank takes could likely push it into insolvency—exacerbating any crisis. Not only that, with such a small capital cushion, it effectively prevents any haircuts on the banks’ exposure, unless the French government allows them to go bust—and of course, the French government never would. So it obliges the French government to get behind any call for debtors to go the route of austerity. Lagarde did this! And this is the fucking idiot—or corrupt bankster’s toady—who’s been tapped to run the IMF . . . and like DSK, Lagarde is aiming for the French presidency in 2017. So any decision she makes as head of the IMF will not be in the best interests of the nations she’s supposed to be helping—it’ll be in the best interests of the French banks.
These individual leaders aren’t the only key players—they’re just a representative sampling of the sort of eurocrat running the shop.
All that these individual leaders have done has been in the service of the financial sector—not of the people of Europe. Perhaps that wasn’t their intent—but intentions don’t matter, all that matters is effect.
And what has the effect been on the other half of our europhrenic patient?
Why, it’s rebelling:
• Denmark: The Danes—who never joined the eurozone to begin with—just put up border controls. It still allows people to cross into and out of it without a passport—but it’ll be a matter of five seconds to close the borders, now that these controls are up and operational. (And you thought America was over-the-top with regards border controls—Denmark borders Germany and Sweden!)
• Finland: The True Finns party just won big on a “Finland-First/Fuck-Foreigners” platform. They have 39 seats in the 200-seat Parliament—just shy of 20%, making them a player in Finnish politics. ‘Nuff said.
• Greece: The Greeks are rioting and collapsing as a society—sensible people are beginning to wonder if another military dictatorship might not take over the country.
• Spaniards: Unemployment is at 20%, youth unemployment is at over 40%, people are protesting—peacefully, for the most part, for now—but all in all, the people are pissed. The IMF and the ECB are throwing money at Spain, but everyone recognizes that that’s just postponing the inevitable.
In short, all that the people of Europe want is an exit from this sinking ship—even as the European political and economic leadership try everything in their power to keep the Good Ship Euro-pop afloat.
Now, I do believe that the sovereign will of the people is not always right. Sometimes, the sovereign democratic majority makes terrible decisions—this shouldn’t be controversial, as we have plenty of examples: Prohibition, for instance.
That the European leadership is trying to force Continent-wide integration against the will of the people in and of itself is not necessarily a bad thing. The whole point of European integration—which is often forgotten—is to tie up Germany and France so tightly that they never again go to war, as they have periodically done over the last couple of millennia.
The problem is, in this particular solvency crisis, the angels are on the side of the people, the devils on the side of the leadership. Whether it is out of cronyism, or political calculation, or whatever other reason there might be, the leadership class is trying to save the banking system— at the cost of the people’s welfare.
The European solvency crisis is barely getting started—we haven’t really seen the worst of it yet. We haven’t even seen the medium of it yet. Which should give us pause, as we consider the following:
As the people and leadership of Europe diverge more and more—that is, as the people experience more suffering as a direct result of the leadership’s policies, and as the leadership continues blindly acting in the best interests of its financial sector as opposed to the people—it is reasonable to expect more and more social upheaval not just in the peripheral nations, but even in the core eurozone member states.
Therefore, it is only a matter of time before the European Union is ripped apart—unless the European leadership as a class understands that shielding the best interests of their financial sector is akin to attacking the interests of the people.
Since core beliefs never change until far past the point of too-late, there is every reason to believe that this crisis will end with the eurozone being torn apart—possibly even the European Union as a whole being broken apart.
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