Cut Greece Adrift To Save the Euro

by
Eric Margolis

Recently
by Eric Margolis: France’s
Far Right Ready for Another Smashing Victory

The last time
Greece faced a crisis of this magnitude was in 490 BC when the armies
and fleets of the Persian Empire were converging on Athens.

The great Athenian
leader Themistocles rallied his countrymen and defeated the Persians.

Alas, this
time Greece has no Themistocles to save the embattled nation. Unlike
the incompetent Persian Emperor Darius, the Greeks now face Germany’s
very tough, stern and able Frau Doktor Angela Merkel who has vowed
to impose “zucht und ordnung” (order and discipline) on
the unruly Greeks. “Get a government,” she is telling
them.

A potentially
fatal run on Greeks banks is underway, with over 800 million euros
withdrawn last week. The sky is indeed falling.

Who can blame
Greek depositors? Default and an exit from the euro zone appear
likely, meaning their money in Greece’s wobbly banks could end up
being converted into re-born drachma, worthy only 50-30% of the
euro.

Greece’s recent
political turmoil and inability to form a government shows its voters
want the benefits of staying in the euro zone, but don’t want to
pay their dues through taxes and slashing deficits.

New elections
scheduled for 17 June are unlikely to resolve this Greek drama.
Leftist parties that stoutly reject the austerity program agreed
upon by the last government in Athens are leading the polls.

On top of this,
Greeks, who look way down on their neighboring Turks and Albanians,
have to suffer through watching these nations grow and manage their
finances pretty well. Maybe Turkish financial advisors for Greece?

Angela Merkel
insists Greece will stay in the euro. But that’s more hope than
fact. German voters are in no mood to bail out the happy-go-lucky
Greeks or swallow more austerity, judging from last week’s important
regional vote in North Rhine-Westphalia. French voters said the
same thing last week when they elected moderate Socialist Francois
Hollande.

What would
happen to Greece if it quit the euro? Financial chaos, capital flight,
riots, and bank failures. But after the apocalypse, Greece would
eventually revert to its 1960’s status: a poor but proud nation
living off tourism, shipping, agriculture and fishing.

Devaluing a
new drachma won’t do much for a nation whose main export is olives
and feta cheese. Besides, the Greeks have severely damaged their
tourist industry by endless strikes and surly service.

Angela Merkel
is rightly concerned that Greece’s exit from the euro would be a
blow to Europe’s political unity. This aspect of the crisis is as
important as the economic/financial dimension.

But Merkel
should also recall the timeless dictum of Prussia’s king and renowned
general, Frederick the Great: “he who defends everything, defends
nothing.”

Greece should
never have been admitted to the euro. It snuck into the currency
union by hiring those miscreants at Goldman Sachs to falsify its
financial books.

Admitting Greece
to the euro zone was a bridge too far. Euro membership should be
limited to those nations that have solid finances and honest reporting.
In short, a club of northern European nations that follow Germanic
good government. Unprepared nations, like Greece, Romania, Bulgaria,
Serbia, Moldova or Ukraine do not belong in the euro zone. Most
have no business in the EU either.

The European
Union and euro zone expanded too far, too fast. Retrenchment is
now in order. As the French say, “fall back to better leap
forward.”

Amidst this
crisis, what many forget is that it was caused by politicians borrowing
too much to buy votes and shady bankers lending recklessly to boost
their own bonuses.

If there is
one thing we learn from the Euromess it is the Golden Rule: governments
must raise any and all funds they spend.

Borrowing from
the money lenders is poison. More empires and nations have been
ruined by unsustainable borrowing than by wars. Politicians should
not be allowed to borrow except for well-defined, long-term projects,
likes roads or bridges, in which revenue streams and repayment schedules
are clearly defined.

There’s
not much the western leaders can do right now to save Greece in
spite of the G8 summit meeting at Camp David, Maryland, this weekend.
More important, Spain’s banks, who loaned vastly too much to property
developers, are threatening to go down like dominos. Portugal and
Italy are showing severe strain. The debt chickens are homing to
roost.

President Barack
Obama keeps urging more debt creation in a vain effort to resolve
the crisis brought on by too much debt in the first place. The real
answer is that nations that erected a house of financial cards must
go through a long, painful period of rehabilitation and fiscal dieting
to break debt addiction.

May
19, 2012

Eric
Margolis [send
him mail] is the author of War
at the Top of the World and the new book, American
Raj: Liberation or Domination?: Resolving the Conflict Between the
West and the Muslim World. See his
website.

Copyright
© 2012 Eric Margolis

The
Best of Eric Margolis