Germany's risk is as big as her stake in the project

Germany runs the risk of being burdened with 100% of the blame for the failure of the euro project, primarily because it's the strongest and most ambitious of the pack. Since it is the major (and most prominent) recipient of profit from the euro, it is easily deemed -by public opinion- responsible for all the problems that EU is facing. In part it is to blame, because it has based its recent economic success on the erosion of income for Germans. It accepted that a growing percentage of its own citizens will live under poverty and even more under the threat of becoming impoverished. This would not be a problem for the rest of Europe if it were not for a common currency that inevitably diffuses the policy of the strongest member.

Although the Maastrich Treaty advocated convergence, harmony in development and social standard guarantees for all, the common currency's reality is one of massive unemployment or working-poverty. The Economic and Monetary Union's design and implementation is evidently a failure for at least half the citizens it affects. It was conceived as a maximalistic idea that might work under ideal circumstances, but it was executed as a book-keepers compromise. The euro project was limited to a no strategy-no authority operation, enforcing the letter of the rules in order to violate the spirit of the rules. This is no more Germany's fault than it is of the rest of the founding members, but it could become Berlin's major problem.

Once started, the Euro project can not be repaired or withdrawn without serious cost. It will soon be imperative to either transform the Eurozone in an economic area that would not alienate its less privileged citizens or to accept that Europe can't continue with a "one size fits all" single currency. There are various solutions available but the problem is always the same.

Union depends on trust. Trust in Eurozone is already running thin. If totally lost by the further impoverishment of the periphery and the lower/middle classes in the core-countries, the rift will be inevitable and could mean the disorderly demise of the EMU project. By virtue of her importance relative to the European Union, Germany will then be the target for much more blame than its share in the original mistake. It is in Berlin's interest to either support a positive metamorphosis of this Union or to accept that its days are numbered and commit to an orderly break-up. Or a mixture of these and possibly other solutions as well, for the various member states. If nothing is done Germany risks being stuck with both the blame and economic losses equivalent to her huge stake in this project.

Athens as part of the solution or as not part of the problem?*

Greece has unwillingly invested 180% of its current GDP in the Euro project. It can't afford to walk away with only the damage of the failed EMU.

Before forming an opinion on whither it's better for Greece and the Eurozone to part ways, one should examine the facts, starting from the basics. Greece should not have entered the Eurozone in the first place. It should not have applied for membership (let alone by using the Goldman Sachs swap trick) and the Eurozone should not have accepted. Both sides were aware of the fact that the Greek economy was only nominally converging with the EU median level, but chose to ignore reality, for purely political reasons.

The Greek has always been a “deficit economy”, like the rest of the periphery. The exchange rate of the Greek Drachma was revealing: In 1978 it took 20 Drachmas to buy one German Mark, in 1988 it stood at 70 Drachmas and in 1998 at 170 per one Mark. Trade and current account imbalances where counterbalanced by the exchange rates. This sort of “security valve” was eliminated with the establishment of the euro, when states forfeited monetary sovereignty but no authority has undertaken the relevant responsibility.

The Eurozone has evidently failed to achieve the aims of the Economic and Monetary Union it was intended to serve (as defined in the Maastrich Treaty): “... harmonious and balanced development of economic activities, sustainable and non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.” The Euro was supposed to be just a medium towards these aims, not the goal. Thirteen years after joining the Euro, the non-core countries like Greece, Italy, Spain, Portugal etc. are undeniably further apart from the core countries than they were before. This can't be explained by the “lazy, cheating Greeks who live beyond their means” stereotype.

The problem with the euro is that it is not a real common currency, but an inflexible fixed exchange rate regime, since it lacks a common economic, fiscal and social policy that would absorb the differences of the various economic realities. The Eurozone is missing what the Federal Republic of Germany uses in order to balance the different realities of (for example) Bayern and Bremen. This must be addressed, either with or without Greece in the club, in order to avoid more divergence, division and conflict down the road.

Letting aside the inherent failings of the Greek reality, it would be unwise to ignore what is now at stake for Athens. Greece has been forced to undergo a “salvation program” that saved mostly the French and German banks, destroyed the Greek economy, impoverished the society and ballooned its national debt. But seen from a different point of view, Greece has invested a good part of the 180% of its current GDP (namely its national debt) in the “Euro project”. If it were to let go now, and seek a solution to its problems alone, with a new national currency, it would essentially be forfeiting its investment and keeping only the damage inflicted from the failure of the EMU.

The Greek government might or might not succeed in securing a deal that would solve the problem of its country and perhaps start the process that the Eurozone needs to become a viable union. If it succeeds, the average Greeks will still face a long period of economic hardship, but with the prospect of a better future, in a better environment. If not, Greece has no other viable option but to cut it's losses and go back to surviving as the poor, small country it was for two centuries at the south eastern border of Europe. If it can't be a part of the solution, it can at least stop being a part of the problem.

* First published in German translation by Hubertus Volmer, at  http://www.n-tv.de/wirtschaft/Teil-der-Loesung-nicht-Teil-des-Problems-article15347436.html

Greece in the "omnipotent government" trap*

The so called negotiations between the Greek government and the rest are in the “dead zone”. What now hangs in the balance is either an agreement for the prolongation of the limbo situation, in order for further talks to take place in search of a real solution to the “Greek problem”, or a rupture.

The Greek government has made it clear that it is not willing to continue on the therapy that was enforced, since it has been proven to have made things worse, without solving the problem. The other side insists that what has not worked so far has to be continued and concluded before any other option is examined.

At this point it might be useful to look back to the problem that Greece faces, not on the fiscal or even structural level. The fiscal problems are of course connected to the structural inefficiencies. But even the admittedly severe structural failings are not the original source of trouble. It goes even deeper than that, into the actual institutional framework of the Greek state.

For 40 years following the fall of the US-backed military dictatorship, Greek politics has been based on the autocratic rule of all-potent prime ministers and their partisan system of clientelism that dominated all aspects of life. Governments have been able to not comply with laws but to change the rules at will, through the absolute hold on the Legislative. In the absence of a system for real control of the executive, laws were even ignored and the constitutional impunity of ministers has made corruption to be perceived as something normal. Situations not unique, since all countries in Europe and beyond have their share of corruption, tax evasion and underground economy, but maximized in Greece for the last 40 years.

All sorts of privileges have been granted or denied to various groups, by laws that have produced a highly dysfunctional economy and an inefficient, chaotic public administration. Insufficient political goods were provided: The Justice system has a backlog of hundreds of thousand cases that will never be judged in a sensible time frame. A private Health and Education market had flourished, since the public system was underfunded and/or mismanaged. Infrastructure was so unequally distributed (in order to maximize profits for contractors and bribes for decision makers) that nearly 70% of Greeks needed to move to the big cities, in order to secure a minimum of decent living standards.

With such a poor record on the public goods offered, it is no wonder that mismanagement, widespread tax evasion and massive underground business have derailed the Greek economy. It was to be expected that such a system would have no resilience, once a major crisis (like in the post-Lehman period) hit Greece. Sadly, the only solution that was ever offered after Greece went practically bankrupt in 2010 was to impose a program of austerity that crippled the national economy (25% drop of GDP), impoverished 40% of citizens and piled more debt on the already high mountain of public obligations.

Suppose that a compromise is achieved between Athens, the institutions and the partner member-countries of the EU/EZ, and a complete collapse is averted. Suppose that a solution is found for the public debt (by now even the IMF and the ECB admit it is not sustainable) and that there is agreement even on the course for the Greek GDP to start growing again. Without radical institutional reform that would ensure that rulers rule, legislators legislate and judges judge, it will only be a matter of time before another collapse, when Greece will be faced with the next crisis.

*First appeared in German translation by Hubertus Volmer at 

http://www.n-tv.de/politik/politik_kommentare/Griechenland-in-der-autokratischen-Falle-article15332956.html

Neoliberalism is...

Neoliberalism is a cure for the illusion of civilized mankind

Neoliberalism is the privatization of democracy and TTIP is its prophet

Neoliberalism is socio-economic warmongering

Neoliberalism is war between money and people

Neoliberalism rewards idle capital

Neoliberal Social-Democrats. Contradiction in terms.

Neoliberalism: Where goods, services, workforce or consumers become irrelevant and profit is extracted through the leverage of public debt

Neoliberalism puts a price to human life according to per capita GDP

Neoliberalism advocates the privatization of law and justice through TTIP

Neoliberalism treats elections as an opinion poll

Neoliberalism advocates solidarity with the banking system

Neoliberalism, or how to degrade a Society into an Economy

Neoliberal rationality: Summer clothing provokes winter snow!

Neoliberalism: Where workforce is a liability and debt is an asset!

Neoliberalism: Hybrid derived from the combination of bad ideas and bad practices catalyzed by bad principles

Neoliberalism: Self-flagellation aimed at impoverishing the potential clients of goods & services so they can't keep the economy running

Neoliberalism, or how to make Europeans remember the Cold War era as "the good old days"

Neoliberalism advocates competing in a race to the bottom

Berlin is single-handedly rewriting the Argonaut Conference

Three months and 70 years ago, the future balance of power in Europe was decided by then soon-to-be winners of WWII. In the Livadia* Palace, near Yalta in Crimea, the leaders of the outgoing British empire, the upcoming empire of the USA as well as the totalitarian “Soviet Socialist” successor to the Russian empire, finalized their plan to end nazi Germany's aggression -aimed at establishing its Third Reich- and negotiated their spheres of domination.

Britain's Prime Minister Winston Churchill, President Franklin D. Roosevelt of the USA, and USSR Premier Joseph Stalin, decided that Germany was to be dismembered, demilitarized, denazified and rehabilitated “so as to never again pose a threat to peace in Europe”, divided between the four occupying forces (defeated and afterwards liberated France was to be given a mandate, comprised by US and British concessions).

With a dividing line established in the middle of occupied Germany, all countries in the west and south would be “guided” by the allies, while those neighboring north-east to the USSR in “reasonable” distance would be handed-over to Moscow's rule. With the exception of Greece, which for geo-politico-strategic reasons, although situated in the extremity of the Balkan peninsula (conceded to Soviet influence) was to be the west's enclave in the region.

The political essence of that agreement between the contingent allies was to define the future of the “modern world” of that time. On one side would be the free-market capitalist proponents of the industrial western world and on the other side the self-proclaimed communists who advocated an egalitarian society via an inefficient centrally planed economy, in transition from the absolutist regimes of czarist Russia and the remnants of the Austro-Hungarian empire in the center-eastern part of Europe.

The “sphere of interest” division was transformed -through the iron curtain- into a nearly total separation between the two models, lasting decades until the fall of the Berlin Wall, in 1989. But separation was not total, in the sense that both regimes tried to emulate selected elements of one-another. The so-called Soviet block had unsuccessfully tried to create it's own type of “people's capitalism”, but only achieved in giving a bad name to anything Socialist and the mere idea of social justice. On the other hand, the Western world had successfully created it's own, so far unprecedented, social security system, which ensured that capitalism would enjoy decades of relative peace between the haves and have-nots.

At the time of its collapse, 45 years after the Yalta “Argonaut Conference”, the undemocratic totalitarian Soviet block was unveiled as what it was: A system with basic political goods -as education and health care- offered to all citizens, bar the dissidents, but with very little in terms of justice, infrastructure, organized markets or civic administration able to compete with the other half of Europe.

Meanwhile, West Germany protected and supported by the USA, had once more emerged as a major player in the global economy. It was only natural that the Federal Republic would absorb the former People's Republic and -after a relatively short period of integration- would seek to utilize its capacity in full. Aspiring to dominate on its neighbors, this time not through war, but via its economic might, it played a major role in the transition of former Soviet satellites towards the “new world order” of deregulated global markets for goods, services and financial products. That's where the euro comes into play.

The common European currency was initially devised to be only one of the cornerstone elements towards a hybrid-federal union of states. Separated from the broad strategy, the euro only fueled the inherent imbalances between the various sets of countries. The current account deficit states, not any more controlling a national currency that would smooth out problems through devaluation, entered a vicious circle of internal inflation and external debt. The monetary union -in a sense- degenerated into a rogue transfer union, where the eternal weaklings of Europe transferred their competitiveness to the strongest states, in return for cheap funds, directed mostly not in capital formation but in consumption. That Greece was the first country to collapse in this system, is due to a combination of many mistakes, inefficiencies and breaches of rules, both on the national and the European level.

At this point, Germany had achieved the status of first among unequal partners, able to dictate its political/economic dogma as the only way forward for Europe. Based on the current economic situation and its own interests, Berlin advocates a new redistribution of spheres of interest in Europe, mostly under its own direction. In this new balance of power, Germany is now seen to methodically promote a three tier segregation of European states, in a revision of the Yalta Conference compromise, decided in her absence, 70 years ago.

In the first tier would be the core-members of the EU, the strongest states of central Europe (let's for argument's sake call them the “3.000 euro per month citizen-states”) like Germany and France, which would be the ones to determine (regardless of their citizens' choices) the policies and means available to the other two: The “1.000 euro per month” states of the “immediate outer circle”, comprised by the relatively advanced countries of the former Western World, such as Italy, Spain, Finland, etc. and the “500 euro per month” outer periphery of former eastern block countries (e.g. the Baltic states, Slovakia, Hungary, Romania, Bulgaria etc.), with the addition of some “usual rogues”, such as Greece or even Portugal.

This is -in my view- the true issue at stake in the current conflict between Greece and the Quintet (formerly known as the Institutions and previously as the Troica). And the outcome of this conflict is certainly not something regarding only the Greeks.

At this point Athens is offered the choice between either slow death in the hands of it's "partner/creditors" or quick death down the Grexit cliff. Is there a third way out or is chancellor Merkel to confirm Otto von Bismarck's observation that “it was always a failing of the Germans to want to attain all or nothing and, in their headstrong way, to rely on one particular course” in the pursue of their ambitions?

____________________________

*Palace in the Livadiya estate, granted by Empress Catherine II of Russia to Lambros Katsonis (1752–1804), a Greek revolutionary and Imperial Russian Army officer, and named thus after Livadeia, Greece, the town he was born in, then part of the Ottoman Empire. It is now a suburb 3 kms west of Yalta.

The road not taken by EU for Greece

A good five years into the modern Greek tragedy, it is obvious that reactions and solutions offered so far have been counter-productive at best, disastrous in sad reality. Much has been written on what went wrong, all culpable sides have been blamed and all innocent ones -namely Greek and other European citizens/taxpayers- have been punished for that. But, one would be tempted to ask, what could have been done before the situation got out of hand, as much as it takes to corrode the trust of European citizens in the entire project of the EU?

To start with the easy answers, we Greeks -who bear a great responsibility for this mess we're in- should have known and have acted better, by not voting for the incompetent and/or corrupt governments that perpetrated the crime. And the Brussels/Frankfurt institutions, who's responsibility it was to supervise and restrain member-countries, should have identified the problem long before it reached the point of no easy return. They had the mandate, the know-how (that ordinary citizens can not possibly have) and all the time to do so before the reckless Greek governments borrowed from the reckless banks and financial institutions, sums of money that could never be payed back. Insatiable greed for unrealistic profits was also fuelled by the rating agencies, which nearly till the inevitable bust advised positively, on buying bonds that were in the end worth close to nil.

Fast rewind to early 2010. The € 110 billion first bailout package from EU member states, the ECB and the IMF (in full breach of the European treaties and the IMF's rules) made sure that institutional lenders, mostly German, French and Dutch banks, were given the face value of the Greek bonds in their portfolios. Bonds that already carried a hefty risk premium, in their high interest rate, as compensation for an eventual sovereign default. The second bailout program, two years later, was just the proof that the first one was the wrong medicine.

Let's imagine what would have happened if another route was chosen at that point; if instead of breaching the rules to enforce a bailout for the benefit of the banks and other “investors”, the rules were broken with the aim of fixing the problem. The ECB could have acted as a responsible central bank and through open market operations could have created as much demand for Greek bonds as needed to keep supply on the plus side, but not as high as to lead to default. Draining the market, at prices much lower than face value, would send the right message to reckless lenders: When you do not act responsibly, you have to suffer the repercussions. What could happen at the date due for repayment of these bonds would be also a lever for pressure on the Greek government, for real structural reform (which, by the way, has very little to do with punitive austerity). And with the right amount of drainage, the market rates for non-refinancing debt would be so high, as to oblige the Greek government to responsibly manage public finances but also low enough to avert default.

Europe, aided by the IMF, took another road instead. It chose to brandish billions upon billions of other peoples' monies as an oppressor's yoke, determined to impose ever more austerity, of indeterminate depth and indefinite duration in order to make of Greece a dreadful example.

Would the “positive” scenario have been beneficial to the European Union? Would it have been a hindrance to real structural and institutional reform, such as one only hopes the current Greek government will eventually establish before it is either toppled or it's term expires? It's no use crying over spilled milk, but it could certainly be useful to examine the facts and draw lessons from the mistakes which now threaten the European project.

The two-thirds society is a European reality

Besides the irrational and degrading (for both givers and takers) "collective guilt - collective punishment" treatment the EU has reserved for Greeks, one must also try to see the broader picture. The so called Economic and Monetary Union has so far failed not only the periphery (Greece, Italy, Spain, Portugal, Ireland...) but also many people in most other countries. The percentage of citizens living at or bellow the poverty level has more than doubled even in “economic miracle” Germany, since the introduction of the euro. Real unemployment in Europe is double the official one, unless one is ready to except as “success” the fact that millions of people are working even full time for wages that keep them well under the poverty level.

Greece has just had the bad luck to be the weakest ring in the chain. It was the first to break under the stress of the Lehman fiasco and Greek governments were the willing collaborators to the -mainly German and French dominated- banking system, in its race to extract what little liquidity was left in the Greek economy.

Decades of incompetent or/and corrupt governments have made sure that there was no resilience in the Greek economy. No production, no competition, no trust in the state and no willingness to share the pain in dire times. Whoever had some serious money (often undeclared and non-taxed income or even bribes from the “good old days”) has long ago stashed it in Swiss, German, French, British, Dutch or other banks or in offshore centres.

The EMU and globalization works fine for banks and large companies which can afford to hire "tax advisers" to guide them in avoiding to pay taxes. And then the states have to both raise taxes for ordinary people and borrow from those who stopped contributing with taxation, in order to balance their budgets. As a consequence no country can properly deliver the basic political goods any more (defense and security, law and justice, health, education, infrastructure). This system makes citizens have less and less trust in the political institutions and degrades democracy to a useless parody. It prepares the ground for ever more oligarchic and authoritarian governments, voted by the first third of the people -those who still enjoy relative prosperity- and tolerated by the middle third under the threat of losing even subsistence level income. Before not long the last one third of Europeans will officially be the pariahs of the continent.    

In a jungle lion is king, there is no democracy

Remember the Maastricht Treaty? The one which as the main aim for the creation of the European Union offered, the "balanced and sustainable economic and social progress" and the raising of the living standards of poor southerners to converge with the rich northerners? The project that would have the Economic and Monetary Union as a tool for achieving this aim? Forget that! The so called European Union has degenerated into a transfer union, where only Germany and a handful of other countries, those with a current account surplus, are able to benefit. How did this happen? Simply by transferring to Germany et al. the most valuable assets -in terms of economic policy- of the “poor south”, in the course of only twelve years.

- Competitiveness: By joining a monetary union without a real economic and fiscal one, the weaker countries forfeited their flexibility. A simple example: Back in 1978 it took 20 drachmas to buy a German mark. By 1988 the exchange rate was at 70 drachmas to the mark. By 1998, two years before the monetary union, it had climbed to 170 drachmas to the mark. All “poor south” countries had to follow similar, if not so steep devaluation paths. Their current account deficits were transformed into rampant internal inflation (here is the ECB's grand failure on its main task towards weakest member-countries) with an inflexible internal and external exchange rate, through a euro which was being gradually overvalued in relation to their national accounts and the real economic developments. On the other hand Germany et al. enjoyed the benefits of a cheap euro -relative to their trade balance- hence their ballooning surpluses. A hard-core euro would most definitely have made German exports too expensive.  

- Employment: After the initial euphoria of cheap money, leading to wage inflation, and with Germany et al. not doing their Hausaufgaben (their beloved expression is “do your homework”) of boosting internal demand and intra-union investment, they exported their unemployment to the lazy southerners and they cheaply imported highly skilled workforce. Benefits from decades of investment in education by Greece, Italy etc. are now reaped by Germany.

- Low borrowing cost: What was originally supposed to be a principal growth tool for poor countries -under a common currency- was quickly transformed into a burden. Borrowing costs for Germany are now negative and at the same time prohibitive for Greece et. al. With deflation being a real threat, repayment of debt by the most indebted is now impossible. By showing solidarity with the banking system, the EU has made things even worse. It broke all rules in order to transfer the risks -undertaken by reckless banks while lending to reckless governments- on the shoulders of Greek and Italian citizens and eventually to all European taxpayers.

The list could grow but the main point is not there any more. It has now boiled down to a political confrontation between the German speaking “establishment” of the neoliberal Europe and the “renegade” left-wing government in Greece, which is trying to cut free from this asymmetrical transfer union. The institutional establishment has chosen to sabotage this government, instead of assisting it to do the “homework” of purging the corruption and mismanagement of decades past. By imposing -through the ECB- the financial and liquidity chokehold (to Greece now and to any other country in the foreseeable future), Germany has made the first step towards the next phase of the “Union”, where in essence only the wealthy can have voting rights on issues that really matter. 

No Representation Without Taxation

Lobbying is not illegal in most countries, but it can nevertheless be a problem for public finances. Lobbying is -by definition- a way of ensuring legislation or regulation favorable to a company, business sector or group of people. More not than often, lobbying results to benefit for public interest, but in most case it is about securing unfair profitability or protection from competition or lowering of standards or something else as ambiguous as that. One of the results of this kind of professional pressure on an international in not global level, is the ability of -mostly large to behemoth- corporations to avoid paying any substantial amount of taxes, by piggybacking on existing legislation with the addition of convenient exemption or redefinition.

There would be two ways of dealing with this problem. One would be to outlaw lobbying altogether, but there is always the risk of returning to the old school practice of covert relations between corporations or interest groups and legislators.

The alternative could be to level the playing field: First by making it mandatory for companies or groups to accurately disclose their activities in this field.

Second, and most important, by enforcing the full and verifiable disclosure of tax payments by companies or groups of companies, together with their results, in a way that enables independent observers to judge the fiscal responsibility of business and inform the public on the matter. Then it would be up to consumers to decide if they really want to pay for this or that mobile phone, cup of coffee or banking service.

Useful reading

http://www.parliament.uk/business/publications/parliamentary-archives/archives-highlights/archives-stamp-act/

http://www.tagesspiegel.de/themen/agenda/eintritt-ins-parlament-der-bundestag-haelt-geheim-welche-lobbyisten-er-hineinlaesst/11544806.html

Public business should be public property. Period

Everything public belongs to the community. Public utilities should never become private because they never cease to be public business. Even the waste or pollution it generates.
When the public pays for utilities and infrastructure, it should as well enjoy the profit these assets generate. It is irrational to concede all public wealth to individuals and then be willing to borrow money from them, with interest, in order to cover public expenses.

Albert Einstein: Economic anarchy of capitalist society real source of all evil

The economic anarchy of capitalist society as it exists today is, in my opinion, the real source of the evil. We see before us a huge community of producers the members of which are unceasingly striving to deprive each other of the fruits of their collective labor—not by force, but on the whole in faithful compliance with legally established rules. In this respect, it is important to realize that the means of production—that is to say, the entire productive capacity that is needed for producing consumer goods as well as additional capital goods—may legally be, and for the most part are, the private property of individuals.

From "Why Socialism?", an article written by Albert Einstein in May 1949 for the first issue of the socialist journal Monthly Review

Un-deregulate banking and finance

Self-regulation of globalized banking and finance was a hoax. It only led to "real money" being swapped for "funny money", at the expense of taxpayers, bank depositors and other available victims. So, paradoxically, debt is now deemed more valuable than savings, and leverage is dictating the rules of engagement in this war. Time to re-establish the Chinese Wall between retail banking and investment banking. For starters... 

Would anyone help me understand?

After so many decades of nominal global growth and technological progress, production costs are bottom low, wages are being depressed and taxes for the have-nots are rising. What is the next phase of this type of capitalism? Since there will soon be no more disposable income for people to consume products and services are we going towards a system with consumer-robots?

Horror Vacui*

For the past twenty years, traditional European center-left and center-right governing parties have been competing in following the excessively neo-liberal policies dictated by the “markets”, thus alienating their traditional electoral clientele. They conceded extreme deregulation in a series of fields such as finance, trade and employment, on the manifestly false assumption that markets will self-regulate through competition, if they are left at their own devices. They enabled tax evasion (or avoidance, which is 99% the same thing, as it constitutes semi-legal fraud) multiplies the pressure on public finances.

The result was growing economic and social inequality both within nations and between countries. The traditional parties thus abolished the “social contract” which kept European societies at peace during the post-WWII era. They allowed the income and wealth gap to grow as much as to create growing masses of working-poor with minimal or no access to proper education and health care. They also force the middle class to carry an ever increasing burden since public expenses are no longer covered by taxing the “haves” but by borrowing from them, often with high interest rates and forcing the “have-nots” to foot the bill. This is obvious even in the German “success story” of the last ten years, a period in which the percentage of people living at or bellow the poverty level has officially doubled.

This problem is magnified in the euro-zone's poorer countries, such as Greece, Spain, Ireland, Italy etc. Although the original Maastricht Treaty for the Economic and Monetary Union stated as it's main aim “to promote economic and social progress which is balanced and sustainable (…) through the strengthening of economic and social cohesion and (…) ultimately including a single currency”, the so called periphery of Europe is diverging instead of converging with the wealthy members of the Union. The evidently faulty architecture of the euro-zone in combination with the failure of EU institutions on monitoring and auditing public finances makes it impossible to secure the social peace needed to pursue a common aim.

By taking active part in the dismantlement of the “social contract”, the European center-left parties, such as the German Social Democrats, the Labour in UK or the Spanish Socialist Workers' Party are now facing the danger of PASOK-ification. PASOK, the Greek socialist party which was in power for most of the previous twenty years and in 2009 regained governing power with more than 42% was thrashed by voters on January 25 this year, getting a meager 4,68%! 

Yes, Greece is indeed a rather different case, but the European center-left parties are facing qualitatively similar political problems. They will either have to regain their position as “protectors of the less privileged” or risk becoming politically irrelevant in the not so far future.

* “Abhorrence of vacuum”, postulate attributed to Aristotle (Physics, book 4), that surrounding material will instantly fill any void in Nature .