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New World Order: A World of TrEUble – Part 1

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

A number of important and game-changing developments have taken place over the past few weeks in Europe. Let’s go over them in a swift roundup, figuring out what the could 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 43.9% to 13.2%; and New Democracy from 33.5% to 18.9%. The radical-left SYRIZA party, a party 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, went from a meager 0.3% to a jarring 7.0%, entering parliament for the first time in its history.

On the same day, the second round of the French presidential elections saw the right-wing president Nicolas Sarkozy (48.36%) ousted from office by 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 the turnaround, the dark horse of French politics, the National Front, the policies of which are far-right, protectionist and anti-immigration, got 17.9% 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 Party for Freedom, led by far-right populist Geert de Wilders, withdrew its support from the coalition government over disagreements on Dutch austerity measures, leading to the government’s collapse. Note that the Netherlands was one of the staunchest supporters of austerity until then, and one of the harshest critics of the profligate peripheral EU nations.

What This Means

Treuble. The hot spots mentioned above – Greece, France, the Netherlands – point 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. Call it 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, or can’t, and those 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, 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 over the years turned into inflammatory rhetoric and economic butchery. In the periphery, where the turmoil is most pronounced, funds have been slashed across the board. There’s no money to do business with. No one’s willing to buy or invest. The austerity has become punishing, shrinking the economies it’s supposed to revitalize. Soaring taxes have wiped out small-size enterprises while crippling middle-size ones. They have 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, spearheads the austerity approach. With its economy the sturdiest and most robust in Europe right now, and with its model having plenty of room ahead of it, Germany dictates 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 at large, the Germans push 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 the approach backfired. 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 their 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 execution fell short. The lack of strategy behind it showed. It indicated that the powers that be took advantage of the mess, or that they were powerless to prevent a feeding frenzy. With their backs to the wall – or maybe the backhanders in their pockets – Greek politicos negotiated asset after asset at ridiculous prices. The buyers made a killing and the middlemen enjoyed their last dips in the gravy, whatever they could get before their unsustainable entitlements were stripped away for good.