Yesterday I saw Podemos on TV. Podemos is the Spanish version of the Greek Syriza. It’s the new radical left that is building up in southern Europe. People there are fed up with northern European driven austerity. They are fed up with a lot of things by the way. They want higher salaries and lower pension ages too. And they want the rich to pay for it all. Or Santa Claus. Or other EU member states.
To some – limited – extent I do have some sympathy for the new radical left in those countries as paying taxes only seems to be for the lower and middle classes. The result being inequality and an unsustainable society. While the past decades were driven by greed, a paradigm shift may well be on its way. How would one even justify inequality? By birth right? By colour? By race? By geography?
Rational arguments clearly do no longer apply. Who will be paying for higher salaries, higher unemployment benefits, and lower pension ages? The new radical left’s only answer is the rich. Obviously, the rich will be long gone before the new radical left is in power. It is the middle classes that helped putting the new radical left into power that will ultimately pay the bill. The middle class cannot run and hide unlike the rich.
Emotional arguments seem to be winning nowadays. I suppose these emotions are based upon the essential unfairness of too much inequality. On top of that come the privileges for the super rich and the scandals about misuse of power and slush funds. At a certain moment emotions take over from common sense and the pendulum makes a swing to the left. I cannot even blame those emotions.
From an American and even an Indian perspective, The Netherlands is a semi communist country. I will always wholeheartedly disagree with that view. I would concur however that The Netherlands – or Germany – are far more equal societies than the USA or India. Germany and The Netherlands also actively prevent too much inequality. To a large extent that situation is – most likely – derived from too much inequality in a distant past, at least in my own country.
In a way, the European Union is to blame too. Greece, Spain and other southern countries would never have been able to borrow so much money if they had not been in the EU. Borrowing in Euros lowered their interest levels and made them borrow even more. Their lenders must also have known about the “too big to fail” dilemma. As a private equity banker once said to me: the more you owe to the bank, the better it is as when things go wrong it is not your problem but the bank’s.
I sincerely doubt that the northern European countries will bail out their overleveraged southern neighbours. The level of empathy or sympathy for our southern European neighbours is far from overwhelming as corruption and tax evasion seem to rule. Emotions work both ways.
I expect a Greek exit (Grexit) from the EU and the Euro as the Greek new radical left government can not and will not surrender within weeks after being elected. The EU cannot accept a precedent of writing off hundreds of billions of Euros as other southern European countries – including France – will want the same favourable treatment. The richer northern European countries will not subsidise the poorer southern European countries. Once a Grexit has been completed then other southern countries may follow its example. Such a situation would then probably result into a northern Euro (Neuro) and a southern Euro like currency. It will take many future decades to merge both again.
The current situation shows the fundamental flaws in the design of the European Union. It is not a Federation that shares its gains and pains like the USA. It’s a mere union of sovereign member states and each with its own independent policies. The Euro is binding us but for how much longer?
A disintegrating EU is a recipe for a new banking – and possibly a new global – crisis as not all risks (e.g., EU exits) have already been priced into the market.
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