Greece and the EU ( or EEC + € ) , ( 1/2)
It is not that Europe is engulfed by economic crisis and near to collapse but it is “simply” that someone in Europe has credits and someone has debts. It is also that the Creditors supplied credit and credit to help their industries to export and during this long time the Debtors were “nations of virtuosi” full engaged in an harmonic development inside the EU.
Then 15/11 ,( the crisis in 2008),and since that moment they were countries with “ bunga-bunga leaders”, (Italy) , “lazy people that want to early retire when the Germans work for them”, (Greece), ”hub of irresponsible banks”,(Ireland),, ”engaged in a not sustainable development focused on real estate speculation”,(Spain), “ all and more…” (Portugal).
Now Greece has voted a draconian austerity programs and the Bankers and CEO´s that till yesterday were supplying credits to sell without any suspect about the real conditions of the economies,( if you believe that they were either naïfs or incompetents), now are the high-skilled managers that try to have back their money. This is, not more not less.
We have to avoid the collapse of a German or a French top bank,( or only to delay it), or that of some multinationals. It is “ironic” that among the draconian measures we find also higher taxes for luxury cars ,( read Made in Germany cars like BMW, Audi, Mercedes),and we wonder if it will not initiate a mortal financial crisis inside the leasing department of ,at least, one of them.
Someone is telling that Greece could set the standard for other PIIGS. We do not believe that.
This “simply” because ,for example, German cannot afford that Italy puts its economy in recession because Berlin sells to Rome more than to Beijing, ( Italy imports 58.476 bld€ and China 53.636 bld€. Or ,if you ,prefer the USA import only 1 bld€ more than Italy. The source is the governative Statiscsches Bundesamt 10-03-2011). Despite the “bunga-bunga government”,( as the German press describes the Italian government),Berlin simply cannot afford to lose Italy because there are not alternative markets, (I).
Unlucky this is the only difference between Italy and Greece.
If Greece can be considered as a test it is only and only for the dimension about the “control” of the internal taxation. But it is unclear if someone will remember it for the future because the taxation is the only real and last shield of the national sovereignty of the state actors against the NSA called EU.
But before we go ahead with the analyses it is important to keep in mind the presence of a trend in the EU. The protests in the UK, the 15-M Movimiento in Spain , the protests of the medical doctors in Germany, the victory of the political movements of the civil society and not of the political apparatus of the parties in Italy ,(II), are telling something that too many unlucky do not want to listen.
We can describe it as the “European Jasmine Revolution” or we can find something else to describe it but ,in any case, it is clear that we face a continental growing social tension that we have not seen since a generation.
And it is not only an European problem.
We agree with the President Obama and his effort to offer to the Americans an universal health care system. This is not at all “communism”, “socialism”,” inefficient EU-style welfare”,( by the way with the same costs the EU supply a global health care to the 100% of its population when the USA, with around the same population ,cannot cover around 1 /3. On clear words it seems that the “socialist” European approach is able to do more than the US-private insurance” approach ). as the Tea Party and its populism tell. President Obama is aware of the risks in term of social instability generated by the social conflicts among the “haves /haves not”. Please do not forget that the degeneration of this conflict was the cause of the terroristic attack in Oklahoma City – the 2nd biggest after 9/11- and of the most important one at the end of 2010 when a WASP, and not a Muslim Al Qaeda affiliate, killed and wounded innocent people in Tucson and among them killed a federal judge and wounded a Jewish Democrat congresswoman . This congresswoman was targeted with a cross ,( a clear symbol of death),by Sarah Palin, one of the leader of the Tea Party and former vice-president candidate .
The same social tensions in China that last year had not less than 100.000 manifestations ,( or if you prefer, on average 11 each hour ), against corruption, the degeneration of the living quality due to pollution and to have higher salary, jobs ,schools, hospitals… .
Or in Russia where the bad average living quality is generating a sharp reduction of the population due to illness.
And more…
This is the only and real background that counts : people are tired to see a future where they are only among the “haves not” !
About the crisis it is clear that is not fundamentally about Greece or even about the indebtedness of the entire currency bloc.
And this simply because if the “fundamentals “ mean something , Greece represents only 2.5 percent of the eurozone’s gross domestic product, (GDP). It is hard to believe that with such small amount Athens can kill the EU and this is another confirm that the problem was other, ( to repay credits to avoid some crash somewhere and to support the financial speculation. A price that , out of hypocrisy, a lot of governments accepted to pay to some financial players ,(NSA´s),in order to hide the real reasons of the problem). Additionally the bloc’s fiscal numbers are not that bad when looked at in the aggregate because its overall deficit and debt figures are in a better shape than those of the United States , ( US 10.6% vs. EU 6.4%) And the EU has not to invest the horrific amount of money that China has to invest to (fast) create its own welfare in order to achieve its main priority : the social stability that can preserve the ruling elite.
The crisis is not economic and not financial but politic and it is questioning how the European continent is to be ruled in the XXI.
But to answer to this question about the future we have to focus a bit on the (recent) past that creates the present we are facing.
In the last 22 years the EU has faced the following two main problems :
Problem 1 –it has emerged from its subservience during the Cold War winning its independence not thanks to its internal strength and after a process of planned actions to create its own status but by default as the superpowers retreated: Russia withdrawing to its Soviet sphere of influence and the United States switching its focus to the Middle East after 9/11.
Problem 2 – Since the 1990s, Europe has dabbled with institutional reform but has left the fundamental question of political integration off the table. Among them also bow to be financially integrated and this is, ultimately ,the source of the current sovereign debt crisis. On clear words : the lack of political oversight over economic integration. To be clear : the only real and effective common monetary /financial policy is that that can also control the taxation of each member.
The 2 problems overlap and it is almost impossible to draw a clear borderline among them.
The Problem 1 means that the EU did not evolved inside the “cold war architecture” to find its own way to become a third integrated but independent player. Not at all and the EU found itself to be alone with its own responsibilities. And before 9/11 we had the Balkan wars to remember us how Brussels was not ready to even assume a regional leadership.
The Problem 2 is the consequence of the Problem 1 in the term to finance the expansion to east that, out of hypocrisy , had ,( and has), three main goals :
a) To avoid that Berlin focus too deeper to east to find a relation with Russia generating the instability of the XIX and XX, ( read security and economy)
b) To counterbalance Moscow to avoid the tensions of the XIX,XX , ( remember the V4 , III) ,( read security)
c) To have markets,( read security and economy)
If we observe the European map ,( considering also Turkey),we find something and that is that Europe suffers from overpopulation. An overpopulation of nations and not of people.
This is also our strength and we can synthesize it telling that no continent has as many rich and ,( at least regional),powerful countries like Europe with its six local powerhouses, ( France, UK, Germany, Russia, Turkey, Italy).
History and not the geography created it and this is the limit that blocks our ability to produce an independent entity capable of global power projection,(IV),but despite of it the EU ,if considered as a whole, is the biggest economy of the world … but unlucky –again because of it – neither the most vibrant nor the most innovative.
This is Europe : a continent that in quantitative term is the biggest economy of the world but not the most innovative and vibrant and ,at the same time, not capable to have any political global power projection. Not even to be a model if the emerging countries are watching more to Beijing then to Brussels as “soft power” of performance-based legitimacy.
In a sentence : what makes us rich is also making us fragmented and weak !
An example is what is going on with one of the two examples of successful integration in the continent : the NATO.
The NATO is an unifying structure so able to unify that includes also who is not an EU member like Turkey but its problem is that unifies for a reason that since 1989 does not exist anymore : to face the USSR as a mortal enemy.
But the USSR is death on 1989 and now we have Russia that is not an enemy but a partner that we have to understand how to integrate, ( the same with Turkey),and that we need ,( as Moscow and Ankara need us) . Russia is still a potential treat and it is not so logic to sell high –tech helicopters, (France), or to build state- of –the- art training centers ,Germany),but it is also true that there is a lot of room to maneuver.
This contradiction on terms is a clear example of our problems.
What are we learning to be facing the Greece crisis ?
We learn to be a confederation of states that outsources day-to-day management of many policy spheres to a bureaucratic arm (the European Commission) and monetary policy to the European Central Bank.
But this is not the EU…this is the European Economic Community , ( the old-fashion EEC), PLUS Euro.
Or , out of hypocrisy, a continent :
-without a real executive
.without a real army
- without a real foreign policy
- in a world where social, economic and security burdens proved too great for individual states to contain and
- with a powerless Brussels to address them.
This is the only real point : important policy issues, such as defense, foreign policy and taxation, remain the sole prerogatives of the states.
And the states still meet in various formats to deal with these problems ( from the debt in Greece to the participation in the Libyan campaign under the UN Resolution 1973 to the search of its own siege at the Un Security Council…and more).
Unlucky under this surface we have the below mentioned social tensions and they will generate rebellion if not solved.
A new ´68 with its legacy of social tensions and conflicts that will degenerated also in armed conflicts with the new version of groups that we described as Brigate Rosse or RAF.
It is this internal problem ,.this cancer ,that is creating a lost generation that we have to solve. This is most important than the Iran nuke or any other international priority.
This has to force us to deep look inward and to do it now in order to find a more perfect union .
A union that will integrate Russia, Turkey and North Africa but this will be at the right moment and this moment is not now.
Again from the EEC to the real EU and not ,like today , to a EEC+€ ( = EEC + Euro).
We will not face situations like the Shay´s rebellion, ( Western Massachusetts 1787),or the Whiskey rebellion ,( Western Pennsylvania 1794), and the American thinkers that are using these examples have a low understanding of our problems today.
We face two symmetric problems that are fueling each other:
a) we need to save the lost generation
b) we need a stronger central mind
About the point A we can to start to activate some simple solutions :
I. to force a minimum wage in all the EU
II. to reduce the tax deduction as costs for the investments outside its own country
III. to force to invest the money received from the government in the country and not to relocate
IV. to add an “ import social tax” for not less than 5 years to the products produced in a new plant in another EU country if the company has closed to relocate
On practical terms.
To force a minimum wage will increase the living standards of a lot of Eastern Europeans and this will create two immediate benefits. It will make less interesting to relocate to save in term of costs and will create bigger local markets in the eastern part of the EU because of the increased income. Markets for the Made in the EU.
To reduce che tax deduction as costs for the investments outside its own country will reduce the benefit to invest abroad adding a barrier to this investment that will cost more. The cost will be the money that cannot be deducted as investments. For example if the company XYZ will close a plant in Alfa to locate in Beta, ( a EU country with cheaper wages),this company cannot use this investment to deduce tax in Alfa.
To force to invest the money received from the government in the country and not to relocate. As made President Sarkozy when he told that the French money supplied by the government to help industries must be invested in France.
To add an “ import social tax” for not less than 5 years to the products produced in a new plant in another EU country if the company has closed to relocate. Let´s imagine a company called XYZ the close in Alfa to open in Beta because of the salaries. In Alfa we have unemployed workers and the cost for their social –reintegration , ( from unemployment benefits to trainings). Who will pay for them ? Who is responsible of this situation. That means that for what it will produced in the new plant XYZ will pay an “import social tax” to fund the costs to reintegrate its former workers. The current law in the EU that gives he chance to track all the life of a product ,( from where is produced to where is sold), is the tool thank to which will be possible to identify the origin and to charge the tax.
About the point B , ( the need of a stronger central mind), in the article tomorrow.
Paolo Dealbertii©2011
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( Editorial Note : If you want to be informed about the financial markets please read the indeces at http://prosumerzen.net/world-financial-indeces/)
Notes :
(I)
http://prosumerzen.net/2011/05/20/germany-and-the-eu-who-needs-the-other/
http://prosumerzen.net/2011/05/23/germanyfrancethe-uk-and-the-eu%e2%80%a6who-needs-whom/
http://prosumerzen.net/2011/05/27/mit-der-nase-volle-indignados-indignati-%e2%80%a6with-broken-balls/
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