collapsed in Moscow, Prague and Belgrade at the end of the Cold
War, ethnic nationalism surged to the surface in all three nations
and tore them apart into 24 countries.
nationalism is now resurgent across Europe. And it is hard to see
how a transnational institution like the European Union, run by
faceless bureaucrats, and the 16-nation eurozone it created long
As of Monday,
Greece and Ireland had been bailed out — Greece with $145 billion,
Ireland with $89 billion. All eyes have now turned to Iberia, to
Portugal and Spain, where bond prices are sinking and interest rates
are rising, and investors are eying the exits.
stock and bond sell-off across Europe testifies to a belief that
this storm is far from over.
a series of bailouts, cobbled together by the EU and International
Monetary Fund, contain these serial crises?
populism and a return of economic nationalism.
telling comments from the Irish about the terms of the bailout of
bank bondholders are to be protected, while the lowest paid and
those most vulnerable people dependent on public provision are to
be crucified,” said trade union leader Jack O’Connor.
the government should default on the bonds,” said writer Valerie
Wilson. “We are suffering so the bondholders don’t suffer. It’s
capitalism gone mad.”
Put Irish people first, before any foreigners holding bonds.
Merkel, whose Germany is fronting much of the bailout money, has
been demanding that bondholders take a haircut — lose some of the
face value of their bonds — in all future bailouts.
the EU agreed to consider it for all bailouts after 2012. But we
may not get there before nervous investors decide to dump their
bonds first and the European house of cards comes crashing down.
bondholders know they will be among the first victims burned in
bailouts in 2013, they may suspect a singeing even before then.
This will impel them to start shedding the bonds of any nation with
deficit and debt problems, which will deepen those deficit and debt
EU-IMF bailout fund is now sufficiently flush to handle a Portugal,
Madrid has an economy twice the size of Greece, Ireland and Portugal
combined. If Spain is forced into a bailout, and Italy, which has
a huge debt, totters, a European panic is on — and a global panic
may not be far behind.
the Germans, who will have to cough up more euros for any new fund
to rescue the governments and banks of nations that are neither
as conscientious nor work as hard as they, are fed up with bailing
out the La Dolce Vita nations of Club Med. If Merkel does not mirror
the mood of her people, her CDU could find itself out in the cold.
come with painful conditions. The governments rescued must cut deficits
and debt, which translates into cuts in public salaries and services
affecting the middle classes, students, the vulnerable and the poor.
the time of austerity has only just begun, there have been mass
protests in Dublin, riots in France, anarchist assaults on Tory
Party headquarters in London and lethal violence in Athens. And
while austerity may be necessary to restore fiscal and financial
health, austerity alone cannot restore prosperity.
us to the character of the people of Europe upon whom these stringencies
are being imposed.
will Greeks, Irish, Portuguese, Spanish, British, French and others,
facing a savaging of social safety nets, accept austerity, without
searching for populist candidates and parties who will default on
the debt and let banks go under?
break free of the discipline of the euro, restore the old national
currency, devalue and stiff the creditors? Argentina did it.
or two of these countries, even the smaller ones, default, America
may not be directly affected, as we own little of the debt of these
countries. But what if the big banks of Europe face wipeouts of
capital and equity due to defaults?
America’s banks so well insulated from Europe’s that their end of
the boat can sink and ours stay afloat? The Credit Anstalt crisis
of 1931 leapt from Austria to Germany to Japan to Britain to the
will Germans play the “good Europeans” and use their savings and
a solid credit rating earned through years of sacrifice to bail
out deadbeat nations whose welfare states are more lavish than their
own? After constant repetition, the Three Musketeers’ slogan of
“all for one, and one for all” can get rather tiresome.
seen how the Asian crisis of the 1990s leapt from country to country
and continent to continent, it is hard to believe the European debt-default
crisis stops with Ireland and Greece.
once said, “Boys, this looks like a five-spiral crash.”
J. Buchanan [send
him mail] is co-founder and editor of The
American Conservative. He is also the author of seven books,
the Right Went Wrong, and A
Republic Not An Empire. His latest book is Churchill,
Hitler, and the Unnecessary War. See his