Europe is Worse Than Reports


A few weeks back I attended a briefing on Europe in general and the Euro in particular.  The entire discussion was under “Chatham Rules”, so I cannot name the sources or their affiliations.  I really cannot even say where the meeting was, other than to say it was somewhere either in North America or Western Europe.

It was the kind of briefing that is so limited by the rules that I would not normally write a single piece based upon it.  But it was so extraordinarily foreign, that I thought it important.

During the presentation I had the opportunity to ask some questions and here is some flavor of the exchanges.  Unfortunately these are paraphrases as I could not take notes or use a recorder:

JVH:  “My business is turnarounds and when you go into a failing business often times what you do is shut down or sell failing divisions, so that you can focus on the healthy part of the business.  Isn’t that really where Europe is with Greece, it would be better off without it?”

Mystery European:  “There are no parallels between running a business and a country.”

Twenty minutes later.

JVH:  “So you really aren’t advocating any economic reason to keep Greece in the Euro?  What about the French and German banks’ exposure on failing Greek debt?”

Second Mystery European:  “Our banks are fine now, they used the bailouts to get rid of their exposure.  It has nothing to do with economics.  Greece’s economy is too small to matter. It is the European idea.  We cannot let Greece fail because they are our fellow Europeans.”

It went on and on including arguments why there should not be democratic referendums on future European integration.   While there were some technical legal arguments, the essential argument against such a democratic stamp of approval is that the pro-Europeans would lose.

So, what to make of all this?  First, we know that if the European economy is so awful that Europeans cannot buy US products that impacts US growth.  Second, I believe that if this conversation with very nice, highly educated, intelligent Europeans is representative, then the entire Euro crisis is caught up in some delusional social science project not economics.  Which leads to the inescapable conclusion that a disaster is approaching.

Although I now understand that business is irrelevant to governing, I do know that in a turnaround if you do not move quickly to fundamental changes in leadership based on real data and real accountability bankruptcy is the outcome.  Add to that the suppression of a democratic vote on further integration and we may face more than economic bankruptcy, but the far more dangerous political bankruptcy that can explode into nationalism.

All in a part of the world with a very bad history for that sort of thing.


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