Thursday, November 3, 2011

Greece and the game of chicken

It is truly unbelievable the game of chicken we've seen played this week in Europe.   Just one week ago, Greece's PM George Papandreou, was handed the deal of the millennium - a write off of 50% of his country's debts -- and he caused havoc when he wanted to put the sweetheart arrangement to a referendum.   He came dangerously close to being overthrown by an internal putsch just this morning but has survived by backing off on the plebiscite.  (This summary from the BBC, twitted in real time, shows just how crazy it was today.)    Making it an even nuttier day, Europe's central bank cut its overnight rate to 1¼%, cutting the spread with the States back to the traditional 1%.

I'm not a real camp follower of the ins and outs of the Eurozone, much less the EU as a whole; but this is no way to run any country, especially one that is part of a multinational currency.   The drachma is as dead as the dodo and the euro is here to stay.  But gone too is the fact that a lot of the entitlements people across Europe have become so attached to will have to go and the others cut back to a sustainable level.    Many of us on this side of the pond get by just fine with two weeks vacation -- six to eight weeks from year one seems quite extravagant unless one is in the military and needs the leave to decompress.    One can understand the protests against entitlement cuts, but where else is there to cut realistically?   And the retirement age has to be 65 to 70 -- people are living longer and the current pension structures can't handle "Freedom 50."

Also dead is the idea of easy credit -- the world got shot in 1929 over sub-prime mortgages and it did again in 2008; haven't we learned anything?    (Canada's exposure may have been far less in that area, maybe 5% of the total but sub-prime mortgages are still to be had.)  Some things like six months maternity leave paid of course should remain, but what about increasing co-pays and actually cracking down on tax cheats?

Future EU candidates as well as present EU countries due to join the Euro next should be subjected to a truly independent forensic audit to show they meet the "stress tests" that a common currency demands.   It's not just Europe that's at stake.     With Canada due to sign a free trade and labour agreement with the bloc in the near future, it's vital we know what we're getting into.   Including the weird characters who can hold the world at bay like a puppet master manipulating a marionette.

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