Our Dutch correspondent H. Numan has translated an article about the euro, one that acknowledges that Geert Wilders was right all along. This is interesting not just in itself — it’s a sensible, cogent analysis of the mess highlighted by today’s referendum in Greece — but also because it acknowledges that Geert Wilders was right. For the Dutch left-wing press, that’s an amazing admission.
The translator sends this brief note:
This is a very important article, as it was written and published in the Volkskrant. They hate Wilders the most.
It’s like a religious dogma: first they deny it.Then they prosecute the adherents. And finally they accept it as their very own dogma…
The translated essay from Volkskrant:
Why Wilders is right about the euro
The euro is not controlled by anyone
A weak economy got the chance to live wildly over budget. The currency union is a failure, so much is obvious, said Yvonne Hofs. No other option remains than to abandon that currency.
Yes, you’ve read it: this will be an essay read with sincere pleasure by the PVV leader. For years Wilders called the euro a bantling. He also stated Germany and The Netherlands are better off with the Guilder and the Deutschmark. Both statements are true. However, since Wilders — being a populist and right wing politician — said it, these arguments are rejected by the so called ‘better-educated part of the population’ almost without any thought, as nonsense.
For euro-supporters it’s a blessing that euro-skepticism by definition is seen as the ‘wrong’ opinion. Nonetheless, euro-skepticism is simply a matter of common sense. The euro is a bantling, because nineteen (let alone even more) very different economies, political cultures and independent states cannot share a common currency without enormous political and economic sacrifices.
Supporters of Greece and the euro ignore political and economic realities. They seem to be obsessed with a naïve belief in progress, where rough power politics plays no part. In real life that sort of politics does play a role, and a crucial one at that.
The USA let California go bankrupt in 2009 when that state couldn’t pay its bills. Even in a federal state it’s not obvious the capital has to bail out a ‘province’.
The pro-euro argument is riddled with fallacies. One often used is that the Randstad (the area with the major cities in Holland and Utrecht, including the capital) subsidizes Limburg. Therefore, why shouldn’t The Netherlands and Germany subsidize Greece? Simply: because Limburg cannot accrue unlimited debts at the expense of the Randstad. Limburg cannot issue state bonds.
Greece is an independent nation that can decide to organize the Olympics and borrow the required €9 billion. In the monetary union as it stands today, Greece has no incentive to control its public debt. As long as Greece remains within the euro it can borrow money much more easily than it could outside the euro. Creditor institutions know their claims can eventually be collected from Germany.
That’s why the interest on the Greek public debt (as well as those of Italy, Spain and Portugal) went down when those countries joined the euro. The debts of euro countries are implicitly guaranteed by Germany. The euro has the perverse effect that weak euro nations can cheaply acquire debt, because a default would be paid for by the strong euro nations.
The Greek public debt is so high that it cannot be paid back ever, regardless of budget cuts. Moreover, these budget cuts damage the Greek economy. The Troika, and notably the IMF insist on economic reforms, such as more efficient tax collection and the raising of the retirement age. These reforms would take time, but would really strengthen the Greek economy. However, consecutive Greek governments haven’t been able to implement them. Whether they are unwilling or impotent is irrelevant. What does matter is the fact that Greece, even after a debt remission, remains a weak economy. Inevitably they will again spent well above budget to maintain their standard of living.
Being a member of the eurozone allows Greece to once again build up enormous debts, go bankrupt after X years, and pass the bill on to Germany. There is no reason at all to assume Greece will follow budgetary discipline should they be bailed out now. The electoral mandate of Greece comes down to: ‘We, the Greek nation, decided democratically that you, the other European nations, have to pay off our debts.’
Debt relief for Greece? Yes, but only on condition the country abandons the euro. Everyone knows a debtor never learns from his mistakes if he always is bailed out by someone else.
Moreover, the Greek debt problem was started by the Greeks themselves. The oft-repeated assertion that Greek financial relief was used only to save the European banks is incorrect. It was the Greeks who entered into these loans. The billions provided by ABN-AMRO to Greek state companies were used to finance the 2004 Olympic equestrian stadium. That hippodrome is now crumbling away in idleness. ABN-AMRO loaned even more money to Greek public transport companies, well known for their high salaries, corruption and horrifying inefficiency. Those highly unprofitable state companies could borrow cheaply because the Greek Government guaranteed the loans. That Greek state guarantee subsequently blended into a state guarantee of other euro nations, notably Germany.
In 2009, when the Greek debt crisis emerged for the fist time, a major portion was owed to foreign banks, mostly German and French. That’s why leaders of government were afraid the Greek debt crisis might lead to a financial crisis all over Europe from the domino effect. That was certainly a consideration for the first Greek bailout package deal.
European banks got rid of their Greek national debts. Most of the debt is now owned by the euro nations themselves, the ECB and the IMF. If we’re talking about banks only, the Troika could have dropped Greece a long time ago. However, the Troika is still working on a deal. Greece benefits from this emergency relief fund. Other nations pay their outstanding bills. That outstanding bill arose because the Greeks lived for ten years well above their financial means. They could do that because of the euro.
That’s not to say Greece is the only problem for the euro, and everything will be fine when we get rid of Greece. Euro-supporters claim the euro brought wealth and prosperity, but that has never been convincingly proved. The benefits of the euro are dwarfed when compared to those of the European Union. Most research stressing the benefits of the euro have been commissioned by European institutions such as the European Commission. Hardly unbiased, in other words…
Nevertheless, those highly biased researches “proving” the benefits of the euro are taken much more seriously than the British Lombard investigation commissioned by the PVV. Part of the criticism of the (just as biased) PVV research was justified, because the actual costs and benefits of the euro are very difficult to calculate. Lombard Street was the first to accept the costs of structural financial transfers by Germany and The Netherlands to the southern euro countries in their calculations.
Independent research on the benefit of the euro shows a small positive effect on European commerce. However, those investigations only paid attention to the profits, not to the costs, and only looked at data of the period preceding the euro crisis. Only during that crisis did it become clear that the eurozone is revealing itself as a financial transfer union, which is proving to be very expensive for strong euro countries. The former German employers’ union BDI chairman Hans-Olaf Henkel changed from a enthusiastic advocate into a fierce opponent for that reason.
Henkel admits Germans industrials like himself were at first in favor of the euro, because nations such as Italy and Spain could not devalue their currencies anymore. German exporters suffered a lot from the constant devaluation of the Lira or the Peso against the German Mark. We simply cannot compete against that, they grumbled. This seems to proof the point of the euro-supporters.
Ironically, it actually proved that Italy for a large part depended on devaluation to keep their economy competitive. Since this is no longer possible, it’s falling further behind Germany. This in turn necessitates structural financial transfers from Germany. The euro didn’t benefit either country. The advantages of a weak euro for German export shouldn’t be exaggerated. When the Deutschmark was rock solid, German industry did very well. According Henkel, the strong mark forced German industry to extra innovation and better productivity. Most Germans didn’t want to give up their the Deutschmark. France demanded it in exchange for French cooperation with the unification of Germany.
Budget cuts and reforms
The euro can only survive under a Brussels dictatorship or oligarchy. Is that what euro-supporters really want?
To keep the euro, weak economic euro nations must face protracted budget cuts and reforms. There is no electoral support for that in those countries. To keep the euro, strong economic euro nations must deliberately weaken their economy or accept they have to forever transfer billions to the weaker economies. There is no electoral support for that in those countries either. The third option for keeping the euro is to merge all euro countries together into one United States of Europe.
An economic union is not possible without a political one. Economists said that time and time again long before the euro officially began its life. However, based on political-opportunistic reasons, this economic truism was ignored.
Should the eurozone after all become one nation with one government? That would prevent Greece incurring debts at the other nations’ expense. There is one problem with this solution: The people of the euro nations don’t want it. They REALLY don’t want it. Supposing today a referendum were to be held on that subject, t would be rejected with an overwhelming majority.
Conclusion: as long as the eurozone remains a democracy, the euro is doomed. The euro can only survive under a Brussels dictatorship or oligarchy. Do the euro supporters really want that? The urge to found smaller independent nation states is very strong in Europe. Catalonia wants to secede from Spain; so do the Basques. When Yugoslavia became a democracy, the federation split into smaller nations. Czechoslovakia fell apart. The Soviet Union fell apart. All this happened with less cultural difference than those within the eurozone countries. The cosmopolitan elites who carry ‘the European project’ vastly underestimate the importance of cultural differences. There is no European identity, and even Jean-Claude Juncker cannot create one by simply waving a bunch of European flags.
As long as talking about the end of the euro remains taboo, the end will be chaotic. The European Union was created to promote peace in Europe, and the euro should have merged European economies together ‘automatically’. The opposite has happened. The euro magnified the cultural and economic differences. The Euro crisis led to distrust amongst the member nations, envy, accusations and sometimes outright anger.
Euro-supporters try to scare their opponents by depicting something that will occur in any case as Armageddon. What they do is postpone the inevitable. They say that merely discussing the topic will create panic on the national stock exchanges. Let alone implementing it.
As long as debating about the demise of the euro remains a taboo, the end will be chaotic indeed. It’s much wiser to prepare for the inevitable and go for a controlled breakup of the euro. The plans for how to do that are there. Euro-skeptic economists propose parallel currencies in a transitional phase. The euro wasn’t introduced in one day, nor can it be abolished in one. And it won’t be gratis.
However, the costs of that for the strong economies such as those of Germany and The Netherlands will be much lower than eternally transferring billions to the south, a chaotic collapse of the European house of cards, or a new war between European states. A historic blunder should never be Hobson’s choice or irreversible. Wilders is completely right about that.