Waiting For a European Santa Claus

By Rachel Marsden Tuesday, May 15, 2012

While your co-workers hover around the water cooler debating whether it matters if Mitt Romney bullied some kid in his youth, a formerly First World nation called Greece is teetering on the brink of bankruptcy. Why, you might ask, should Middle America pry its overworked eyes away from Jennifer Lopez gyrating around in a bodysuit on "American Idol" long enough to bother caring?

Now replace "Greece" with "your bank." It suddenly matters a little more, doesn't it? What if your bank couldn't loan you money, give you a mortgage or allow you to ring up credit-card debt, all because the bank abruptly had much less with which to leverage your lifestyle since Greece decided to finally pull itself off fiscal life support. Granted, American banks only hold about $2 billion in Greek debt bonds, according to a 2011 Federal Reserve survey. But more significantly, they hold $34 billion worth of such bonds in Italy and Spain. If these two countries ever decide to flake out -- a real possibility, referred to as "contagion" -- good luck trying to get your bank to finance that car you can't afford.

Not that staying in the eurozone would prevent collapse, either. If anything, it would only hasten the demise of the other member states. The eurozone fell into this crisis due to the stunningly illogical idea that a cost-heavy system could support itself indefinitely. When reality slowly dawned on the European powers that be, they proposed a series of desperate tax grabs, many under the guise of environmentalism and climate change. Too little, too late, and way too scammy to be worth pursuing for any single national leader who risks being voted out of office as a result of martyring himself for Europe.

Sheer political will continues to be the only container keeping this high-entropy system from blasting into full chaos. The scene of former French President Nicolas Sarkozy browbeating German Chancellor Angela Merkel to bail out Greece in the very first installation of this graphic international snuff-film series should remain a symbol of why the whole concept was destined for disorder.

The most troublesome thing of all is that logic and pragmatic realism, however painful, are still taking a back seat to short-term appetites. Voters in France and Greece proved that they're willing to cycle through governments over and over until someone fixes their predicament. They want Santa Claus, as if they were 5 years old again. They don't care if Mom and Dad are broke and have no money -- they're going to sit on that lap and scream until the magic elves at the North Pole workshop are commanded to make it all better. Rejecting austerity is like asking Santa for a Ferrari and a baby brother when your parents are broke and post-menopausal.

New French President Francois Hollande was apparently mugged by reality on the way home from his victory party, as he admitted before even taking office that he'd discovered the fiscal situation in France was even worse than portrayed by his predecessor. While likely disappointing for some, that admission is a reassuring sign of sanity.

I have no idea what goes on in the heads of anti-austerity French, Greeks or any other citizens of financially strapped European countries who think there's an alternative to austerity that's any less drastic than an entire systemic revamping of the welfare state and public service. Even austerity measures have had a minimal impact thus far, mainly because the situation is so dire in countries like Greece that almost any countermeasure is just a case of putting a Band-Aid on a gushing head wound. Austerity is the very least that ought to be inflicted in an attempt to reverse course, and voters don't even want that.

So what's the solution? The best thing that could happen would be for the euro to be forced down in value to stimulate exports, to promote local products over foreign ones, and to boost domestic production -- similar to the way that China has benefitted from keeping the yuan devalued, much to the irritation of U.S. President Barack Obama and leaders in other Western nations. This would get the economic ball rolling again and improve European productivity, rather than leaving the task to China, India, Brazil and other emerging markets. This idea certainly couldn't be any worse than what's been tried to date. And it beats waiting around for Santa Claus to get elected.