The Whole System Has Failed

It looks set to be a very hot week in the EU, as Greece finally defaults and maybe exits the eurozone and the EU.

Twenty years ago, opposition to the EU (then EEC) seemed to be almost non-existent. Now it seems there’s hardly a country within the EU in which there aren’t loud calls for escape from its clutches. In Austria:

Austrians have launched a petition to quit the EU, arguing that the nation will be better off economically if it leaves the union. To force the national parliament to consider the initiative activists need to have gathered 100,000 signatures by July 1…

“We are not any longer a sovereign state in the European Union. Over 80 percent of all essential legislation is being imposed by Brussels, not by elected commissioners. In our view, Europe is not a democracy. The European Parliament does not even have legislative powers,” Rauscher told Sputnik Radio…

Recent polls show that only about one third of Austrians would be in favor of leaving the EU,…

Quite aside from Greece, the signs of disintegration are multiplying. How long can it go on like this?

Today Vaclav Klaus, economist and former Czech president, today posted a long article about the Greek crisis and the EU. On the EU (my added emphases):

…The economic stagnation Europe is facing is not a historical inevitability, it is a man-made problem. It is an outcome of a deliberately chosen, and for years and decades gradually developed, European economic and social system on the one hand and of the more and more centralistic and undemocratic European Union institutional arrangements on the other. They both, and especially they together, form an unsurmountable obstacle to any positive development in the future. Let me briefly indicate some steps towards a perspective solution.

1. The European overregulated economy, additionally constrained by a heavy load of social and environmental requirements, operating in a paternalistic welfare state atmosphere, cannot grow. This burden is too heavy. If Europe wants to start growing again, it has to undertake a far-reaching transformation of its economic and social system.

2. The excessive and unnatural centralization, bureaucratization, harmonization, standardization and unification of the European continent have led to a deep democratic defect there. Getting rid of it requires changing the whole concept of the European integration, eliminating its post-Maastricht developments. We have to rehabilitate the concept of the nation-state which has proved to be an irreplaceable institution – for nothing less important than democracy. To continue repeating the erroneous view that nation-state inevitably leads to wars must be stopped.

3. The euro evidently did not help practically anyone. It weakened the self-discipline of individual countries. It created a “fuzzy” state of affairs, without clear delimitation of competencies and responsibilities. It produced an exchange rate which is too soft for the countries of the European North and too hard for the European South. It opened the doors to unproductive and involuntary redistribution (this is not an authentic personal solidarity but government-organized fiscal transfers.)

The belief that the very heterogeneous European economy could be – in a relatively short period of time – made homogenous by means of monetary unification belongs to the category of wishful thinking. Europe can be made more homogenous only by evolution, not by revolution, not by means of a political project.

4. Some directly uninvolved observers and critics (mostly from America) keep telling us – as if we didn’t know – that it was a mistake to establish a monetary union whose members enjoy fiscal sovereignty. They are recommending us to accompany it with a genuine, full-fledged fiscal union and don’t want to hear that the people of Europe want to retain fiscal sovereignty of their nations.

5. Europe faces a big immigration problem. We have to reintroduce some sort of borders, to get rid of overgenerous welfare state policies, and to forget the destructive ideology of multiculturalism. The economists should explain to politicians that the massive immigration is not a necessary precondition for restarting economic growth in Europe. European economic stagnation has not been caused by labour shortage.

6. The much needed change must start by acknowledging that the whole system has failed and that the system must be changed. Partial measures are not significant because they cannot change its substance. We need a fundamental transformation of our thinking and of our behaviour. We do need a “Paradigma Wechsel” [paradigm shift].

We should return to free-market principles, to a fundamental deregulation, liberalization and desubsidization of the European economy. We shouldn´t count on more regulation. We already have too much of it. Those of us who experienced communism have to say that we did not expect that government interventionism, to the extent we see now, could emerge again. It seemed to us that the masterminding of the economy from above was so discredited by the communist experience that it could never return. We were wrong.

We also wrongly assumed that everyone took for granted that government failure is inevitably much bigger than any imaginable market failure, that the visible hand of the government is always much more dangerous than the invisible hand of the market, that vertical relations in society are less productive (and less democratic) than horizontal relations.  We were also proved wrong…

I wouldn’t disagree with a word of that. But when is the EU political class going to realise that the EU ‘project’ has failed?


About Frank Davis

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27 Responses to The Whole System Has Failed

  1. jaxthefirst says:

    “ … as Greece finally defaults and maybe exits the eurozone and the EU.

    What never ceases to amaze me in all these debates about Greece is (we are told) that the Greek people apparently want to stay in the union, blaming (again, we are told) successive national Governments for their plight rather than the heavy hand of the EU. Is this really true? Maybe some of your Greece-residing readers (Nika?) can confirm or deny this. Is Syriza an anti-EU party or a pro-EU one? I’ve never actually been able to make it out one way or the other. They seem to talk a tough game, and yet much of what they say seems to be pretty pro-EU.

    Or is it like Poland where (again, we were told) everyone was delighted to be new members, whereas a recent conversation I had with a Polish girlfriend of a friend of my OH’s answer to the question was “Polish politicians like the EU; but the Polish people? No.” Just like here, in fact.

    I personally think that the EU will fight tooth and nail to keep Greece in the Union, even agreeing to yet another bailout if that’s necessary, first and foremost because they are such an arrogant, stubborn bunch that they simply can’t countenance the fact that a country might actually make a break for freedom and succeed in escaping their clutches, but also because if Greece were to leave, and their economy were to begin bouncing back to some semblance of health (as I strongly suspect that it would) it would highlight to every other nation still under the yoke of the EU that the only way for economic success and a healthy, happy population is to get out from under and to reclaim their independence back from these overbearing, undemocratic, ideal-driven control freaks. Like dominoes, once one has gone ….

    • Frank Davis says:

      Is Syriza an anti-EU party or a pro-EU one?

      I think that its platform is pro-EU, but I’ve read that privately Tsipras is anti-EU.

      And the timing of Tsipras in announcing the referendum (after midnight on Friday night, with a weekend ahead) made me think it had been planned some while earlier. It gives the Greek government time to do stuff (like bring back the drachma). I think that when the various bodies – the EU, IMF, ECB didn’t budge, and didn’t even consider Greek proposals, Tsipras decided that they had to get out. Maybe he’s got promises of assistance from Russia and China – he’s been to Russia enough times in the past few months to have done some deal. Putin would love to detach an EU member state from the EU.

      As for whether the EU will fight tooth and nail to keep Greece in the EU, I think people like Wolfgang Schauble would be glad to see the back of Greece, while Merkel and Hollande can see that it would be politically very damaging to lose an EU member.

      But I think that whether Greece leaves or stays, the whole episode has already been deeply damaging. There’s been no effective EU leadership. The crisis has just rolled on like a runaway bus. And the tactics employed against Greece have looked like bullying and blackmailing, and not the sort of thing you’d expect in a community of equals. There really needed to be a European statesman who could rise above national identity and speak on behalf of the entire EU, but there was nobody like that. Everyone is looking after their own people first and foremost. Which is another indicator that a single European state isn’t going to happen.

    • Jim says:

      I think the reason the Greek public keep voting for political parties that are pro-EU is that they want to stay attached to the teat. Before joining the EU Greece was dirt poor, and received massive amounts of EEC (as it then was) funds when it joined. Then it joined the Euro, which effectively allowed it to live beyond its means even more on the back of the strength of the euro, this strength being based on the other non-Greek economies working harder (and paying more taxes).

      Thus the alternative is to return to the drachma, leave the EU, and live independently on the wealth they can generate by their own efforts. And they deep down know that would not be a pretty sight. It would mean decades of grinding hard work, as they reduce the amount of State largesse, and create real wealth generating economic sectors. This cannot happen overnight, and would result in a generation of lower living standards (from what they have become accustomed to as a result of the overspending of the euro years).

      Its like a petulant teenager who lives at home and gets an allowance. He rails against his parents for their petty rules, and how mean they are for his meagre allowance, and how unfair it all is, but will not countenance leaving home, getting a job, paying his own way and living his own independent life. That would be too much like hard work.

  2. waltc says:

    …”when is the EU political class going to realise that the EU ‘project’ has failed?” They don’t care that it’s failed. Ideology is more important than reality . Ideology is “never having to say you’re sorry.” Surely, the Soviet political class knew that their Five Year Plans were a bust; knew that the standard of living for the great majority sucked, knew that they kept control through lithium and Lubyanka , but as long as they had they’re daschas and happily shopped at GUM, they could comfortably sit around and plan the next Five Years. As we know from our own (smokers’) experience, when something doesn’t work, they pile more something on it.

  3. cherie79 says:

    Terrific article, just wish our politicians were as clear, I agree with every word.

  4. DICK R says:

    According to the BBC and the rest of the slavish left wing press, dissent is confined to a few racist xenophobic bores living in Southern England , this increasingly corrupt neo Soviet empire is becoming increasingly despised the length and breadth of the entire continent .
    When the taxpayers of Germany in particular finally realise that they are being betrayed by their own Eurofanatical Government, and the cash flow finally dries up, then the end ,as they say will be nigh!

    • prog says:

      Yes. the German taxpayer’s patience will be wearing thin.

      I believe part of the German psyche is that one works and SAVES in order to fulfil on’s aspirations, rather bear huge debt. Unlike many other places in Europe. Then again, wasn’t that the norm for most of us in the past. Bar perhaps house buying, level of liability for which was strictly controlled by a more responsible lending system, with the relatively recent ability to cheaply borrow at several times joint income undoubtedly contributing to the dramatic increases in the value of property. The first step on the property ownership ladder is now little more than a pipe-dream for most young people.

  5. harleyrider1978 says:

    Harley, Im still around just been dealing with a lot of PTSD type issues from it all. Having stupid silly panic attacks still and really affecting my sleep. Hopefully getting a CPAP machine this week the same as my brothers. He has 2 stents same as me smokes 2 packs a day and takes the same drugs they got me on now. As soon as I beat this panic attack issues Im gonna be back in the fight again…………….Sleep deprivation doesn’t help and I discovered Iv got sleep apnea light and f I got a CPAP its fix most of my sleep issues and after some well deserved rest Id likely be able to defeat the panic attacks. At least that’s the program and with some therapy……….

  6. harleyrider1978 says:

    Has the New Orleans smoking ban sent you across parish lines to light up in a bar?

    Have New Orleans smokers discovered great new bars in adjacent parishes?

  7. Frank Davis says:

    The Day the Euro Died

    …And there can now be no winners. While Greece remained depressed but compliant, the EU masters could pretend that Euro membership would eventually deliver the promised prosperity. But now, even if Greece by some miracle remains in the Euro, its relationship with the rest of the Eurozone is fundamentally changed.

    Freezing ELA means that Greece can now only regard itself as a “user” of the Euro rather than a full member of the currency union. There is no legal means for countries to leave the Euro, but it seems that they can be frozen out. This should not be seen as similar to the Cyprus situation: liquidity in Cyprus was restricted because its banks were insolvent. Greece’s banks are not insolvent (yet). The ECB’s statement makes no mention of bank solvency: the liquidity freeze responds to the failure of the talks and the decision by the Greek government to call a referendum. The freeze is therefore an overtly political move. The independence of the ECB has been shattered.

    The “irrevocability” of the Euro is no longer credible. Using liquidity restriction to force a country to introduce capital controls is tantamount to suspending its Euro membership. So the sovereign debt of other distressed Eurozone countries will now carry a risk premium because of the possibility of membership suspension. Yields on other periphery bonds have already risen sharply, and although they will probably settle as the initial shock wears off, it seems unlikely that they will return to their previous low level.

    The Euro can no longer be regarded as a “single currency”. It has been revealed for what it really is, a system of hard currency pegs between 19 – or perhaps now 18 – sovereign countries. And a system of hard currency pegs is fragile. The risk that the Eurozone will unravel is substantially increased.

    As Manfred Weber, chairman of the EPP Group in the European Parliament, said, “The Eurozone is no longer the same after the events of the past few days”.

    History will regard Sunday June 28th, 2015, as the day the Euro died.

  8. harleyrider1978 says:

    I just figured out Good therapy is getting back into the game and Im out fighting back taking my mind off my own issues for a change rath th sitting in a chair wrapped in a blanket panicking over nothing. I bought me some Marlboro lights shorts and Im smoking about 10 a day right now,while my brother is a 2 pack man a day for 12 years on Plavix and 2 stents………why am I so horrorfied because the Nazis had me literally tied by my hands and feet in the hospital for 7 days and nites it broke my spirit and my life from the trauma and then the crazed fanatical doctors one in particular and after 2 stays at the hospitals he works at I was told nobody likes him as he is an extremist with no bed side manner at all except to scare the hell out of all his patients. Dr Lee told me I could smoke if I wanted to just keep it at a minimum and work towards quitting. But Id need to stay on Plavix forever if I continued to smoke. The smokers paradox as Iro showed us all and the study was done in Nashville Tn by Vanderbilt University……..go figure

    • waltc says:

      It’s perfectly rational that you’d have PTSD and panic attacks since it sounds as tho you were tortured as well as having the s scared out of you. Give it time and maybe some Valium and just know it will pass. It will. And how bout ecigs? Do they, would they, help?

      • harleyrider1978 says:

        hadn’t thought about an ecig at all walt. Might try that. Ya the Ptsd shit really sucks im actually not even got outdoors yet and am in need of a cpap sleep study right now and crisis intervention at the VA told the sleep study folks it was an emergency case for me to get in so I can get the benefits of it right now not in a month. They have me assigned for july 17th but the girl who runs the evening study was emailed to see if she could get me in any earlier and if so IM OUT THE DOOR with the wife heading to Murfreesboro for the all nite study and then hopefully within a week or so Id have my machine in hand.

        • Smoking Lamp says:

          Harley, Glad you’re back in the fight!

        • Rose says:

          Harley, I am so sorry that you are going through all this.

        • harleyrider1978 says:

          Thank You Miss Rose as I have no idea how I even got it. I was like fine for 4-5 days after getting out of the hospital,All tests were great and a complete recovery made except this dang PTSD shows up out of nowhere from it all.

          I posted a few links below about it. Veterans Crisis team told me over 60% of their calls is PTSD from veterans post hospital stays in trauma units……..

          That’s an amazing number of victims. I feel like a lite switch that can be turned on or off at will by deep rooted fears. I might be fine on emoment and then feel my skin crawling and ready for a nervous panic attack and then it builds and builds until your in full blown depression and tears.

          Anyway Im using the crisis line and wearing them out with it but Im going to beat it just as sure as I fight the Nazis hard. I am stronger than this unwarranted fear Im having.

          Its a rough road but I feel like if I can get rested with a cpap machine and behavioral treatments via phone right now I can beat it.

          Today for the first time in 5 weeks I put on pants and a shirt instead ofmy blanket and a corner. I even made it to the mailbox and back but was a tad dizzy from the walk as I haven’t really been excercizing like I should Instead going thru an emotional roller coaster in the big chair fearing being left alone………..classic full blown PTSD I have been confirmed with via mental health services.

          Im gonna beat it,I wont be a shut in nor a recluse from the world. I must pick myself up and wrap up tight and face the challenges placed before me and win!

        • Frank Davis says:

          Keep on keeping on, Harley.

  9. nisakiman says:

    A lot of people are poionting fingers at Greece’s leaders with claims that they are acting irresponsibly, but Nobel-prize winning U.S. economist Paul Krugman said Greece is doing the right thing.

    He argues that the financial noose arond Greece’s neck has strangled the Greek economy. Every loan comes attached with spending cuts, austerity and damage to the Greek economy.

    In the past, in every situation Greece has caved, becoming little more than a “financial slave state mired in an economic depression. There is no way Greece will ever be able to cut its way to rosperity,” says Krugman.”Given that Europe refuses to restructure Greece’s debt in a sustainable way and allow the country to try to grow its way out of its misery, Greece has no choice but to default and withdraw.”

    The political class, and those who believe them are broadly in favour of remaining in the Eurozone and the EU. The rest want out. Which way the vote will go next weekend is anybody’s guess. I really haven’t a clue. But I feel that whatever the result of the vote, Greece will effectively be cast adrift by The Great And The Good in the EU hierarchy, and that the only solution for Greece will be to go back to the Drachma. It will mean a few difficult years, but the Greeks are nothing if not resilient and resourceful. and they will bounce back from this in better shape than they were in with the Euro.

    Greece joining the Euro in the first place was a disaster waiting to happen. That was so obvious it smacked you in the face. How on earth could a country that is essentially agrarian, with no industrial base and heavily reliant on tourism going to mix it with a country like Germany? They are chalk and cheese, and to think that those two countries could operate under the same financial and economic strictures was wishful thinking writ large. It was doomed from the start.

  10. Furtive Ferret says:

    The Czech’s are a civilized, mature and liberal people compared to the rest of the EU. They also talk a lot of sense. In fact they remain probably the last civilzed EU country on the basis that they still give business owners the ability to choose whether their patron’s can smoke inside.

    That alone was one of the reasons why I worked as an IT contractor there for the last three years. The CZ republic is probably the only EU country that I would consider going back to. Sadly it seems as though even the Czech’s can resist the pressure from the anti-smoking brigade and I read that a draft anti-smoking bill is going through their parliament.

  11. harleyrider1978 says:

    Greek Contagion Spreads As Several Italian Bank Stocks Failed To Open

    The Best in uncensored news, information, and analysis

  12. harleyrider1978 says:

    Prevalence of PTSD and Major Depression Following TraumaCenter Hospitalization

  13. harleyrider1978 says:

    Wow a baby donkey was just born next door right beside our house and with that my wife came and got me and I made it outside feelings of apprehension but I went and dared my nerves. The small donkey was fighting to get to his feet the same as me and with the courage to do it regardless of fear or condition. I made it around the house slightly dizzy but in good form then went to my shop and picked up my gun belts and brought back in the room and hung them on the wall with my matched pistolas in them each.

    Yes I made the most challenging moment yet………escaping my safe place to the outdoors. I even felt like firing up my jacked up jeep but my sternum still hurts from the cpr and its a good climb into the drivers seat so I better save that adventure for another day……….

    BTW we have tornado warnings til 8pm………….

    • waltc says:

      Dizziness can come from hyperventilating which comes from –and goes along with–anxiety. (Tho, yes, it can also come from physical weakness from lack of exercise.) There are many easy tricks to regulate (slow) your breathing, which in turn can help tamp both dizzy ness and anxiety, and they’re likely yours for a google. And you can also download some light exercise tapes or cd’s that you can do indoors. And again, a little Valium can be your friend for the time being and also help you sleep. Know when to push yourself and when to let yourself be.

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