Opinion

Hugo Dixon

Chaotic catharsis

By Hugo Dixon
November 7, 2011

Chaos, drama and crisis are all Greek words. So is catharsis. Europe is perched between chaos and catharsis, as the political dramas in Athens and Rome reach crisis point. One path leads to destruction; the other rebirth. Though there are signs of hope, a few more missteps will lead down into the chasm.

The dramas in the two cradles of European civilization are similar and, in bizarre ways, linked. Last week’s decision by George Papandreou to call a referendum on whether the Greeks were in favor of the country’s latest bailout program set off a chain reaction that is bringing down not only his government but probably that of Silvio Berlusconi too.

The mad referendum plan, which has now been rescinded, shocked Germany’s Angela Merkel and France’s Nicolas Sarkozy so much that they threatened to cut off funding to Greece unless it got its act together — a move that would drive it out of the euro. But this is probably an empty threat, at least in the short term, because of the way that Athens is roped to Rome. If Greece is pushed over the edge, Italy could be dragged over too and then the whole single currency would collapse. So, ironically, Athens is being saved from the immediate consequences of its delinquency by the fear of a much bigger disaster across the Ionian Sea.

Italian bond yields, which were already uncomfortably high, shot up after the Greek referendum fiasco. Berlusconi was forced to pacify Merkel and Sarkozy at the G20 meeting in Cannes by agreeing to a parliamentary confidence vote on his government’s lackluster reform program as well as to monitoring by the International Monetary Fund. The humiliation in Cannes, where Berlusconi’s finance minister pointedly failed to back him, could be the final nail in the PM’s coffin.

The end of the Berlusconi and Papandreou eras should, in theory, be a cause for celebration. Although the Italian PM’s behavior has been scandalous, whereas the Greek PM’s has not been, they have both led their countries deeper into debt. They are also both members of political castes that have enfeebled their nations for many years. Getting rid of them could be the start of a renewal process.

The snag is that it’s not certain that what comes next will be better. In both countries, where I have spent much of the last fortnight, the best outcome would be national unity governments committed to rooting out corruption and cutting back overgenerous welfare states. This could happen either before or after snap elections. Unfortunately, the old political castes die hard. They could continue bickering over who suffers the most pain and who gets the top jobs until they are staring into the abyss — or even fall in.

Many in the rest of Europe, meanwhile, would probably love to push them over the edge if they were themselves strong enough to take the strain. But Merkel, Sarkozy et al have been criminal in their lack of preparation. The so-called comprehensive plan agreed to at the euro summit of Oct. 26 was another case of too little, too late. Not only was the plan for recapitalizing Europe’s banks only about half as big as it should have been as well as foolishly delayed until next June; the scheme for leveraging up the region’s safety net, the European Financial Stability Facility, is full of holes. This became clear at Cannes, where Merkel had to admit that few other G20 countries wanted to invest in it.

The whole of Europe is now in a race against time. The Greeks have to get their act together before the rest of Europe is ready to cut them loose. The Italians have to restore credibility before they get sucked into a vortex from which they can’t escape. And the rest need to put in place really strong contingency plans in case Athens and Rome continue to let them down. If everybody runs very fast, the last week could be the beginning of the catharsis. If not, chaos beckons.

Comments
6 comments so far | RSS Comments RSS

I think you are being blithely optimistic. If they get their act together on the bonds, they survive, but it is not a solution to their problems. For all their snobbish pretense of their cultural superiority, the Europeans have never gotten close to the level of governmental sophistication that the U.S. took as its first principal. The solution they are attempting to create is based on a German/French collaboration, which will alienate and threaten the British, the Dutch, the Scands, ‘new Europe’, and the Med states. They will tolerate it for now, knowing they can veto it later. The EU is carefully crafted to avoid the concentration of power, that, tho the T-Par-T hates it, Washington exercises routinely, in routinely avoiding the unsolvable problems of Europe. I’ll take my puritanical, rustic, jingoistic, declining empire over their odds any day.

Posted by ARJTurgot2 | Report as abusive
 

The comment on blithe optimism is well taken. So is the writer’s warning of impending chaos. As a complete non-expert in Europe, it seems to me what we’re watching is suicide in slow motion. I wish they’d just get on with it and let the chips fall where it may. Cheer up, blithe optimism, you’re about to observe a Greek tragedy unfold in real time, hopefully far enough away that you can simply enjoy the catharsis and learn the adaptive lessons required.

Which are that the banks have got to fail, the top heavy financial services sector has to be squashed, major multinationals have to be broken up into more competitive and smaller pieces, and politicians have to start refusing bribes in favour of stern action in support of the best interests of their peoples or they’ll get chucked out of office. Or worse. (That means more welfare, not less, by the way).

Posted by SueSueSue | Report as abusive
 

Sir , everything is one political game. You all have been very unfair with the PM George Papandreou. Before he got to the referendum decision, he had to face a lot of political contraversy which was leading to be politically unstable. It is very difficult to lead a country or better to govern one which everybody are totally against you. European union and especially Greece , had nothing to be afraid from the referendum. Maybe the greek people were disappointed but none of them wanted to leave the European Union. George Papandreou was the only strong educated and well recognized person that could face the European Leaders and tell as it is. Referendum is the democracy in action. Is the people’s vote for matters that their lives depend on them .

Posted by llois | Report as abusive
 

In ancient Greece, catharsis was a blood sacrifice, purification and house-cleansing: healing through purging.
The household detritus was taken to a crossroads, or shrine to Hekate, and left – without looking back.
We should be so lucky.

Posted by Matthew_Sleigh | Report as abusive
 

@sue

This is the epilog to the tragedy. European civilization committed suicide in two world wars.

Posted by ARJTurgot2 | Report as abusive
 

“old political castes die hard”

That is why the eurozone monetary policy is not the quantitative easing (sounds like flatulence) used in england and us of america.

Since 26 October, the eurozone membership showed errant politicians that their fiscal policy either performs or reforms. Recalcitrant Greek politicians now understand that other eurozone members are not going to financially support them.

So England and its City financiers need to realise that the eurozone is not going to prevent Greece and Italy receiving their fiscal spanking. And the rest of Central Europe is solidly behind markets punishing politicians from any caste who wallow in the troughs of corruption and lassitude.

No amount of anti-euro inflammatory headlines from the uk section of reuters will change that course of action.

Posted by scythe | Report as abusive
 

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