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New World Order: A World of TrEUble – Part 1

(First published on Urban Times on 20th May 2012)

Certain important and game-changing developments have taken place over the past few weeks in Europe. Let us go over them in a swift roundup, indicating what they amount to down the line.

May 6 saw shifts in power in both France and Greece (Photo: Aris Messinis)

On May 6, Greece held general elections. Both mainstream parties (PASOK and New Democracy) were thrashed. PASOK dropped from the 43.9% it had received in the previous elections to 13.2%; and New Democracy dropped from 33.5% to 18.9%. The radical left SYRIZA party, a party that is staunchly “anti-bail-out” and “anti-euro”, surged in popularity, rising from 4.6% to 16.8%, while Xrysi Avgi (Golden Dawn), a “national-popular” movement with overt ties to neo-Nazism and fascism, entered parliament for the first time with a rise from a meager 0.3% to a jarring 7.0%.

On the same day, the second round of the French presidential elections was held, in which the right-wing president Nicolas Sarkozy (48.36%) was ousted from office in favor of the socialist François Hollande (51.64%).

The result marked a U-turn on austerity policy, sending shock waves down the spine of the European recovery mechanism. In the wake of all this, the dark horse of French politics, the National Front, the policies of which are far-right, protectionist and anti-immigration, got 17.9% of the votes in the polls in the first round, a figure that leaves many frowning and worried.

And in the Netherlands, a couple of weeks earlier, the Dutch coalition government fell apart as Geert de Wilders’s far-right Party for Freedom withdrew its support over issues on Dutch austerity measures. Note that the Netherlands was one of the staunchest supporters of austerity and one of the harshest critics of the profligate peripheral EU nations.

What This Means

Treuble. The hot spots above – Greece, France, the Netherlands – are pointing to an interesting but tricky period in European and, possibly, world affairs. The dramatic changing of the guard has come about from an abrupt change in mood, following the violent and continuing aftershocks of the eurozone crisis. It is a reaction to policies that don’t seem to be working. Policies that come across as too knee-jerky and contradictory. 

Nations, like people, cannot spend beyond their means for too long

Take austerity, for instance, the biggest issue in Europe right now. Everyone knows that nations, like people, cannot spend beyond their means for too long. They have to get it right at one point. Those who don’t, those who can’t, and those who are unwilling to do so, piggyback-riding their way forward on other people’s achievements, have been taken aside and given a talking down to. Rightly so. ‘Get your act together because the time for freeloading is over,’ is what the facts are telling us, so we best oblige.

On the other hand, the talking down to, which started off in the form of public berating, swift haircuts and decisive restructuring, has quickly turned into inflammatory rhetoric and economic butchery. In the periphery, funds have been slashed across the board. There is no money to do business with. No one is willing to buy or invest. The austerity has become so austere it is shrinking the economies it is supposedly revitalizing. Soaring taxes have wiped out small-size enterprises and crippled middle-size ones. It has choked innovation, paralyzed commerce, and sowed the seeds of distrust and anger among millions of citizens. Not a good way to overhaul countries in crisis.

Sign on the left: “Stay in the Euro.” Sign on the right: “Return to the Drachma.” IMF helicopter: “Make up your mind, Mr. Mitsos!” And Mr. Mitsos: “I’d like an advance for shoes! Even flip flops!” (credit: Kostas Mitsopoulos)

Germany, champion of austerity, has spearheaded this initiative. With her economy being the sturdiest and most robust in Europe right now, and with her model having plenty of room ahead of it, she has dictated policy, demanding that the money loaned to the prodigal nations will be managed responsibly. To ensure this is properly done, and with the support of the IMF, the European Central Bank, and the EU in general, she has pushed for radical reforms on the clearly unsustainable mechanisms of faltering states such as Greece. including pay cuts, layoffs and privatization. A natural and reasonable demand.

But it was badly executed. With bond markets creaking left, right and center, the panic led to a clumsy rush, which in turn led to what many individuals in Greece regarded as a shameful sell-off of national assets to foreign gold-diggers. Necessary as the privatization may have been, as there was no other way to escape the stranglehold of the terribly inefficient and corrupt public sector, the manner in which it was carried out fell short. The lack of strategy behind it showed. It indicated that the powers that be were taking advantage of the mess while saving the nation, or that they were powerless to prevent a feeding frenzy. With their backs to the wall (or the backhanders in their pockets), Greek politicos were negotiating asset after asset at ridiculous prices. The buyers were making a killing and the middlemen were enjoying their last dips in the gravy, before their unsustainable entitlements were stripped away for good.