When Lightning Strikes

Merkel and Hollande discuss the fate of Europe

If there are such things as signs, this one is unmistakable: the airplane that was taking France’s new president, Francois Hollande, to meet with German Chancellor Angela Merkel and discuss the Greek Disaster (aka “the end of times”) was struck by lightning shortly after it took off and had to return to Paris. Apparently the universe is trying to make things harder for Europe.

Hollande, of course, ignored the universe, got into another plane and headed to Germany, having met Merkel with only one hour of delay. His goal was indeed one that required persistence: to convince his fellow EU leader to focus more on spending, instead of saving, in order to restore order in the Euro zone. He didn’t quite achieve it yet, and the Germans (aka “the key to the safe”) insist on austerity measures, much to the regret of Greeks, Spanish, and others.

As a forced medicine, austerity measures, coming too strictly and too soon, are killing the patient, according to a growing number of economists (and people with good common sense).  Not only that: it might be helping spread the disease, including its political symptoms. Greece is close to game over stage, with the winners of the May 6 elections failing to form a coalition government that could keep the terms of the bailout and the membership of the Euro zone. Meanwhile, European leaders are trying to portray the next Greek elections, scheduled for June 17^th, as a referendum on the Euro membership. Greeks overwhelmingly favor sticking with the currency, according to polls, and the rest of Europe hopes that this is translated by a victory of parties more willing to abide by the current rules.

Still, Hollande speaks of stimulating economies (as opposed to imposing cut after cut) as indispensable. The alternative, he says, doesn’t look good so far: Greece’s unemployment is at 24% and the government (when they have one) is far from being able to reduce the deficit to manageable levels. The risk of being forced to print money to pay the bills is rising, and it would make Greece the first to abandon the Euro. Expected shocks stemming from that could make sure it’s not the last.

There is an argument around that the medicine is being applied out of morals. It’s like Europe is making Greece “pay” for the sin of overspending. Germans would argue: “why do we, who have been responsible, have to pay for their mistakes?”. That might even sound fair, but the edge of the abyss is no place to be clinging to moral debates. Greece is falling, and it might take a lot of others with it. Europe should stop being self-righteous and start being practical. We’ll see if Hollande will be able to facilitate that.