Taking Stock: The European Union

Dear Mr. Berko: The solution to the economic problems in Greece seems simple. The members of the European Union should lend money to Greece so it will have enough euros to pay its creditors. Once the pressure is off and the Greek banks have enough money and breathing room after they pay their bills, the Greeks can get back to doing what Greek does best: tourism and exports. Perhaps this is too simplistic, so I would really appreciate a simple explanation and your thoughts on why the European Union refuses to help.

T.R. in Rochester, Minn.

Dear TR: The brouhaha in Greece reminds me of the proverbial story of Hans, the little Dutch boy and the leaking dike. Shortly after Hans plugs the first leak with his forefinger, other leaks appeared the next morning and the following days and Hans eventually runs out of fingers. Then many little Dutch boys came to Hans' aid, but so many holes appeared that all the queen's boys and all the queen's girls couldn't put the dike back together again. That dike, poorly managed and badly designed, is best left to collapse rather than being rebuilt.

And so it is with Greece. Why should German or French citizens support Greece's bloated civil service pensions, a distended welfare system, a slothful work force, a crooked political and banking system, intransigent unions, pandemic corruption, then indemnify failing Greek banks for loans made on knowingly worthless assets? Greeks have been pulling euros out of their banks (deposits are not insured like U.S. bank deposits), so Greece is running out of euros and can't pay its bills and teeters on the cusp of a black hole. No matter how you slice the souvlaki, the lamb has too many maggots. Let it fall and bring back the drachma! Returning to the drachma will be painful, but that pain is short-lived compared to a rotten marriage that could last for decades. Those most at risk and screaming the loudest are the international banks, investment bankers and hedge funds that continued to lend money to Greece in spite of its profligate spending. Now those banksters are demanding their money back in euros. U.S. banks have a $47 billion exposure to Greek debt, not including Greek bonds held by U.S. mutual funds. French and German banks have a $30 billion exposure. And this doesn't include $71 billion in Greek debt guaranteed by credit default swaps issued by Merrill, UBS, Citigroup, Morgan Stanley, Wachovia, etc. ''Let them eat'' drachmas; Greece can't borrow its way out of debt. Iceland declared bankruptcy a few years ago. Its stock market collapsed, GDP fell by 6 percent and a recession ensued. Today, Iceland is stronger than ever. Argentina's default in 2002 and subsequent devaluation created uncomfortable short-term pain. But Argentinians paid the price, and the middle class gutted it out. Argentina regained its competitiveness, and the country began to enjoy the ensuing prosperous long-term benefits.

In 2002, a Durham college professor sent me his co-authored article, which mentioned that the euro will forge a strong and prosperous political, social and economic union, creating a united Europe that will be the backbone of a new global economy and will hugely benefit humanity. ''What a crock of rocks.'' It was so poorly written that I couldn't wait to put it down. And in May of 2002, I responded here: '' Hold your nose, the EU is PU and is destined to fail. A United Europe is a utopian fantasy and a vainglorious monument to the pomposity of the European intelligentsia. A United Europe is a plan for inevitable failure. The potential damage (economic, political, and social) could result in a European depression with catastrophic consequences, including anarchy.'' The EU is a failure of good people whose culture, goals, values, expectations and languages are as diverse as cheese and chalk. Great civilizations become great civilizations because of commonality; their diversity causes them to fail. Europe is always a hot bed of ideologies, the realities of which are responsible for four major conflicts in the past 70 years: World War I, World War II, the Cold War and the bloody Balkans.''

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@ yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com

Copyright 2012 Creators.com

Published: Mon, Aug 13, 2012

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