By Sikander Hayat
The problem with the Euro is that it treats a country like Greece as if it is the same as Germany in terms of its economy, politics, culture and other aspects of its social fabric. We know very well that this is not the case as countries and cultures acquire ways of doing things in their own way. Greece cannot be turned into Germany, Germany cannot be turned into Greece and yet the single currency euro tries to do just that. Since 2008, Greece's economy has gone down 25%, loosing millions of jobs, forcing citizens to emigrate, pension schemes to collapse, loss of sovereignty and directly leading to the rise of ultra right and ultra left wing political parties.
Germany is widely blamed by the Greek for their country's problems. People of Greece invoke second world war and occupation by Nazi Germany as an earlier example of German belligerence . Greeks argue that what Germans did militarily during the second world war, they are now doing to Greece with economic weapons at their disposal and yet Greece's desire to stick to is incomprehensible. There must be some tangible benefits for sticking with eurozone, that countries like Greece are paying a heavy price to stay rather than leave it. Current bailout phase will end soon and then Greece will be left to its own devices till the next crash happens.
The problem with the Euro is that it treats a country like Greece as if it is the same as Germany in terms of its economy, politics, culture and other aspects of its social fabric. We know very well that this is not the case as countries and cultures acquire ways of doing things in their own way. Greece cannot be turned into Germany, Germany cannot be turned into Greece and yet the single currency euro tries to do just that. Since 2008, Greece's economy has gone down 25%, loosing millions of jobs, forcing citizens to emigrate, pension schemes to collapse, loss of sovereignty and directly leading to the rise of ultra right and ultra left wing political parties.
Germany is widely blamed by the Greek for their country's problems. People of Greece invoke second world war and occupation by Nazi Germany as an earlier example of German belligerence . Greeks argue that what Germans did militarily during the second world war, they are now doing to Greece with economic weapons at their disposal and yet Greece's desire to stick to is incomprehensible. There must be some tangible benefits for sticking with eurozone, that countries like Greece are paying a heavy price to stay rather than leave it. Current bailout phase will end soon and then Greece will be left to its own devices till the next crash happens.
Love affair with being a member of eurozone is incomprehensible as being a member of EU is not the same thing as being a member of eurozone. A country can be a member of EU without being a member of eurozone (a currency union). Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and the United Kingdom (Brexit will soon change that) are members of the European Union but are not the members of the eurozone and have their own currencies. They can set their own monetary policy by moving interest rates up or down depending on how their economies are doing. If the economy is overheating, these countries (e.g United Kingdom) can move their interest rate higher to curtail the money supply and move the interest rate down if the economy needs stimulus to grow. After the financial crash of 2008, United Kingdom even embarked on a programme called quantitative easing (QE for short) by buying billions of Pounds worth of corporate and treasury bonds. The jury is still out on the wisdom of quantitative easing as it may turn out to be a cause of a bigger disaster than the crash of 2008 but discussion on that needs a separate article.
The point I am trying to make is that Greece will do far better outside the single currency and being part of EU than with the single currency. If Greece goes out of the single currency, it will get her sovereignty back and will be able to set her own course in terms of monetary policy. It can be argued that although in theory Greece can set its own fiscal policy at the moment but given that it owes so much money to its creditors, in realty it cannot even set it own fiscal policy. Creditors have a say on what Greece can and cannot do, who will be taxed, who can take a strike action, which industrial sector pays how much tax and so and so forth.
Greece's sovereignty is a sham in so many different ways. It pretends to be a sovereign nation but it is not a sovereign nation in so many different ways. It can be argued that bailout programme has been a charade as like all other bailout programmes, it has been a bailout for creditors and not the debtor nation of Greece. European Union is a project which has put itself in a bind by introducing Euro as a single currency for countries with opposing historical narratives. It is proving increasingly hard to reform the single currency because no country wants to pay for the perceived/real profligacy of the other countries.
A currency is a matter of trust, where each region trusts another and can transfer funds where required. This can only be done in nation states. Germans do not trust Greece and vice versa. Greece is trying to stay within the eurozone at all costs. It may succeed for the time being to stay in EU but in the long run, if another crises strikes and by that time there is no political union or a banking union, there is a chance that staying a member of Euro may not be an option. There is fatigue in Germany as people are sick of being taken advantage of by less fiscally responsible nations.
Angela Merkel is having huge problems in forming a coalition government as her policies in becoming a banker to the whole of Europe and allowing huge influx of immigrants into EU have come under huge criticism both from right and left of German political class. Social Democrats have so far declined to become part of the coalition and other parties like Greens are asking for stuff which cannot be delivered. All this points at a very difficult question for Germany's position at the heart of European project. So far Germany has been the lender of last resort for many EU nations and has tried to keep EU together by sort of buying off other countries.
All this money comes from German tax payers who demand that this is spent at home for the betterment of Germans and not some far off places, which in their minds caused their own problems by living beyond their means. German political consensus is creaking under the weight of all these predicaments and when Merkel goes, the next chancellor may not be able to keep the German polity behind the European project. A lot of countries are part of EU and euro because they are net recipients of European Union funds. Countries like Poland whose sole contribution to EU is the huge number of migrants (directly resulting in Brexit) and taking billions upon billions from EU funds.
What happens when these funds dry up and Poland has to become a net contributor. Some countries are treating this project as a huge gravy train and may be Greece's insistence on staying in the Euro stems from the same calculation that if they leave EU, they will stop receiving these funds. France also escaped narrowly when Emmanuel Macron won against Marine Le Pen but it was a close call in the larger context. It is very clear that European project is based on Franco German pillars and the moment one of these countries buckle under the weight of non performing countries, all bets are off.
Related Posts:
1. Where is the next financial crash in America & Europe coming from? The problems with forecasting a financial crash.
2. CyptoCurrencies – Is Bitcoin A Vehicle For Terrorist Financing And Money Laundering?
3. Are Trump Tax Cuts Good For United States of America? Will The Tax Intake Increase?
The point I am trying to make is that Greece will do far better outside the single currency and being part of EU than with the single currency. If Greece goes out of the single currency, it will get her sovereignty back and will be able to set her own course in terms of monetary policy. It can be argued that although in theory Greece can set its own fiscal policy at the moment but given that it owes so much money to its creditors, in realty it cannot even set it own fiscal policy. Creditors have a say on what Greece can and cannot do, who will be taxed, who can take a strike action, which industrial sector pays how much tax and so and so forth.
Greece's sovereignty is a sham in so many different ways. It pretends to be a sovereign nation but it is not a sovereign nation in so many different ways. It can be argued that bailout programme has been a charade as like all other bailout programmes, it has been a bailout for creditors and not the debtor nation of Greece. European Union is a project which has put itself in a bind by introducing Euro as a single currency for countries with opposing historical narratives. It is proving increasingly hard to reform the single currency because no country wants to pay for the perceived/real profligacy of the other countries.
A currency is a matter of trust, where each region trusts another and can transfer funds where required. This can only be done in nation states. Germans do not trust Greece and vice versa. Greece is trying to stay within the eurozone at all costs. It may succeed for the time being to stay in EU but in the long run, if another crises strikes and by that time there is no political union or a banking union, there is a chance that staying a member of Euro may not be an option. There is fatigue in Germany as people are sick of being taken advantage of by less fiscally responsible nations.
Angela Merkel is having huge problems in forming a coalition government as her policies in becoming a banker to the whole of Europe and allowing huge influx of immigrants into EU have come under huge criticism both from right and left of German political class. Social Democrats have so far declined to become part of the coalition and other parties like Greens are asking for stuff which cannot be delivered. All this points at a very difficult question for Germany's position at the heart of European project. So far Germany has been the lender of last resort for many EU nations and has tried to keep EU together by sort of buying off other countries.
All this money comes from German tax payers who demand that this is spent at home for the betterment of Germans and not some far off places, which in their minds caused their own problems by living beyond their means. German political consensus is creaking under the weight of all these predicaments and when Merkel goes, the next chancellor may not be able to keep the German polity behind the European project. A lot of countries are part of EU and euro because they are net recipients of European Union funds. Countries like Poland whose sole contribution to EU is the huge number of migrants (directly resulting in Brexit) and taking billions upon billions from EU funds.
What happens when these funds dry up and Poland has to become a net contributor. Some countries are treating this project as a huge gravy train and may be Greece's insistence on staying in the Euro stems from the same calculation that if they leave EU, they will stop receiving these funds. France also escaped narrowly when Emmanuel Macron won against Marine Le Pen but it was a close call in the larger context. It is very clear that European project is based on Franco German pillars and the moment one of these countries buckle under the weight of non performing countries, all bets are off.
Related Posts:
1. Where is the next financial crash in America & Europe coming from? The problems with forecasting a financial crash.
2. CyptoCurrencies – Is Bitcoin A Vehicle For Terrorist Financing And Money Laundering?
3. Are Trump Tax Cuts Good For United States of America? Will The Tax Intake Increase?
Comments
Post a Comment
Thanks for leaving comments. You are making this discussion richer and more beneficial to everyone. Do not hold back.