Ever Closer Union Not A Certainty

Mrs Merkel took a bit of blow in the recent German elections. She had been widely tipped to sail serenely in to office again, for an unprecedented fourth term as German Chancellor. However although she retained the post, it was something of a Pyrrhic victory as it came with a steep price.

Pyrrhic Victories Are Always Costly .... Ask Mrs May In The UK.   
Credit Library of Congress "Another victory like this and our money's gone!"

Her party had its worst electoral performance in 70 years, and it ushered in a 'far right' (in the eyes of the left leaning media at least), party for the first time since 1945. So she has limped over the finishing line, faced with the prospect of months of haggling with the Greens, and the Pro-Business Free Democratic Party to form a workable coalition.

European Union: Democratic or Despotic?

Today, sometime tonight in fact, the democratically elected majority government of Greece will be dissolved and replaced by a 'national unity coalition' .... the reason for this change is that the EU rescue package terms are so opposed by the Greek public, that the Greek government had called for a 'referendum' to get a public endorsement of the bail out terms.

Now the referendum is off the table, and the Greeks were told to either take the money and implement the plan in full, or leave the Euro-zone (or even the EU itself if Pres. Sarkozy of France had his way) .... they vote tonight to create a 'stable' government, and then to fulfil all the bail out plan terms laid down by Germany and France. Italy, is in much the same boat with their government have to agree to EU inspectors looking at the state books, even though it has had no bail out funds so far. Of course in Greece this 'national unity coalition' isn't likely to last more than a few weeks at best, so this could all be just another sticking plaster, and Greece just leaves the Euro-zone after the new year (as most people expect).

So, this raises the question of whether this is actually the first stage of the death of national independent democratic governments in Europe, with the small Euro-zone countries being forced to do what the big two Euro-zone economies want inside a federal straight jacket? There are many in Greece who believe that they are being sacrificed to bring in a 'Federal Europe', which their political leaders will benefit from, but they will suffer for.


Will this be how the EU enforces the bail out in Greece?

Interestingly, late on Tuesday the Greek government  replaced the heads of the army, navy and air force and the chief of joint chiefs of staff in what officials described as a long-planned move largely unrelated to political turmoil ..... this has raised fears that they were preempting a coup attempt. Memories of the rule of 'The Colonels' in a military junta between 1967 and 1974 still run deep in the Greek psyche.

As the imaginary Chinese adage can be said .... "we live in interesting times".

Update: The BBC has just run an article on the 9th November, which includes the lines:

"These are disturbing days for European democracy. The euro-zone crisis is driving out elected leaders. European officials are telling elected governments what to do".

They agree with the idea that there's now a risk that democracy is being replaced by a EU unelected technocracy, it just takes them three days longer than us to reach that conclusion.

Greeks Will Default On Debt

At least that's the sentiment of the Greeks I talked to for a week .... they all consider it a certainty that Greece will default on its debts. Everyone I spoke to said that Greece would never pay back its debt. That it couldn't ever keep up the debt repayments for even a few years, let alone the decades required to cure the underlying problems, and that lending it more and more money was 'stupid' but 'German' because it just made the debt worse, not better.

In fact the consensus was that as soon as the Greek government had drawn the next tranche of EU/IMF funds, the price paid to get this money would prove to be too great, and Greece would default sometime over the coming winter, but before the next tourist season, so that they can devalue and get their competitive edge back. Most of them wished that their government would just do it now, instead of taking them to the edge of a civil breakdown (and possibly a left right civil war), by stretching the country to breaking point, but then defaulting anyway.

There was even a rumour that the UK mint (or other, secret, Greek printers) are printing a supply of Drachmas in secret .... which just goes to show how far things have gone. I managed to avoid all the strikes and travel disruptions travelling there and back, but I was told that the disruptions would get a lot worse over the coming winter. Many Greeks have been thrown into poverty, not so much in the resorts where the holiday trade underpins the economy, but in the bloated public sectors, which are the mainstay of Greek employment these days. It was noticeable that it was mostly British workers in many of the bars in the resorts, when 15 - 20 years ago it was mostly Greek workers, with just a few Brits employed.

The Drachma - Many Greeks expect this to return.

We could  be seeing this currency return to our holiday wallets next year ..... wouldn't that signal a big reverse in the European federal dream?