As always, the devil is in the details.
And yes, we got such a devilish detail when Greece Labor Minister Andreas Loverdos said that Greece will keep the retirement age at 65.
“We managed to maintain the (retirement) age limit at 65 years,” Loverdos said, referring to talks with European and IMF officials on austerity measures.
By itself that doesn’t look like such a big deal, but comparing it to what is law in Germany, things could change for the worst when you take into account that in March 2007, Germany hiked its retirement age from 65 to 67, whereby anyone born in 1964 or later will have to wait until they are 67 to collect a state pension.
No, Germany was not on life support in 2007 when they forced their statutory pensions system back into balance.
Yes, that’s how Europe works these days. Urgent exceptions are in.
The question is: Do you really think that the Germans will overlook this exception for Greece, and probably even more exceptions for Greece and other euro zone members, in the foreseeable future? I don’t think so and, at least in my opinion, this looks like really bad news to come for Europe as a whole and the euro in particular.
During the weekend, European Central Bank President Jean-Claude Trichet, who in January solemnly pledged not to relax the ECB lending rule book for the sake of one country (Greece), now has capitulated.
He has diluted the ECB rules for the second time in a month whereby it allows them to keep taking Greek government bonds, which have now junk status, as collateral for loans.
If you ask me, this unprecedented act will undoubtedly leave a sour taste with regards to the ECB’s long-term credibility. Imagine what could happen, now that they have relaxed the rules for Greece (the only country so far), when other Club Med countries, and even Ireland, would need some kind of exception?
Who would have thought that even the president of the European Central Bank’s words can no longer be taken for truth?
Unfortunately, maybe that’s not the biggest problem which is facing Europe.
The crisis in the European Union is now moving its focus to its own birth defect, which is that of an incomplete political union that got stuck somewhere in midstream.
The common market with its only “partially” shared euro currency (only 16 countries of the 27 member states of the European Union have the euro as their currency) has evolved within an economic zone where European-level institutions with sufficient powers to ensure effective coordination of the economic policies of the member states are nonexistent.
Its ‘Stability Pact’ is full of holes in such a way that it is sufficient to counterbalance the unintended consequences of a planned asymmetry between economic and political unification.
One must understand that today, the EU finance commissioner (minister) has no right to even inspect the draft budgets of the member governments. Since budgetary law is the core of parliamentary democracy, you can imagine how Germany, as well as other countries, feels about it.
Remember what Henry Kissinger said: “Who do I call if I want to call Europe? Only one person matters. The Chancellor of Germany.” Period.
Now, we have noticed that the generation of rulers (chancellors) in Germany since the chancellorship of Gerhard Schröder has pursued an inward-looking national policy.
Please don’t misunderstand me and I don’t want to overestimate the role of Germany in Europe. But the breach in mentalities which did set in after Helmut Kohl who was Chancellor of Germany from 1982 to 1998 (of West Germany between 1982 and 1990 and of a reunited Germany between 1990 and 1998) has major significance for Europe.
Germany seems to indicate that it is becoming increasingly less disposed to guarantee the preservation of the unstable status quo within the European Union.
No doubt that this financial crisis has reinforced national egoisms.
Today, for the first time, the European project has reached an impasse.
The dream scenario of a coordination of the euro zone economic policies that should lead to an integration of policies in other sectors is in a limbo.
It becomes now clear that Europe lacks historical understanding of the shifts in relationship between the market and political power and, as there is no coordination of the economic policies in the euro zone, there is that huge danger that is emerging whereby real European unification will remain nothing more than an administratively driven elite project.
Besides that, and what makes things even worse is that the so-called Club Med and Ireland will have to implement the same policies that crippled Europe in the early 1930s, that in fact led to France’s Laval “deflation decrees,” and led in different ways to Hitler, Franco, Antonescu, and Metaxas in Greece.
Bottom line: We are in for troubled times with Greece and others in Europe, Iran, China, etc., where risk-aversion will become top priority once again with the dollar up and practically everything else down.
But don’t panic. Times will become better sometime in the future when the dollar will become weaker again.
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