After the American Century
Since writing the previous posting about the Greek debt crisis, the New York Times has published an article about the widespread failure of wealthy Greeks to pay income tax. Estimates are that the Greek government has failed to collect $30 billion every year. In other words, there really should be no debt crisis, but there is a corruption crisis.
How can the European governments be conned into bailing out a country that is systematically being ripped off by its own citizens? See the Times story here.
The idea that the Euro should drop in value because of corruption is Greece is absurd. The rest of Europe should punish Greece for bad faith and for harming the common interests of the rest of the EU member states.
And the bankers, who were willing to loan money to Greece, assuming that they could pressure the rest of the EU to secure the loans, should be more tightly regulated. The EU should put in its constitution that each nation is responsible for its own debts, and that no other nation has any responsibility to make them good. Rather, EU nations might turn to their federal government in times of natural catastrophe, invasion, or other calamities over which they had no control.
Why does all this matter? Because Greece is only the worst case. The EU has been too lax. It has allowed member nations to ignore fiscal responsibility. It has allowed bubble economies to grow in Spanish and Irish real estate. After the collapse of the Spanish bubble unemployment has risen to 20%. Entire housing estates in Ireland have been built without finding buyers, and thousands of houses stand empty there.
This is the first crisis of the Euro, and if it wants to be taken seriously as a world currency, the EU has to put a stop to fiscal irresponsibility. As it is, the EU members such as Sweden, Denmark, and Britain, that have not joined the common currency are likely to wait a good long time before they can muster a majority to take the plunge.