Euro crisis: What’s next in global drama

While the world is here to play, if not suffer Auckland’s public transport problems, the bigger drama remains the euro-zone and its potential to trigger another global financial crisis.

Op-eds on the future of the euro and whether the European integration model can work, compared with the US model, are a dime (or should that be five cents) a dozen.

Earlier this week, I outlined the attitude of the Germans and how they were planning for a Greek default, while day-to-day coverage has emphasised soothing political messages that, somehow, Europe will muddle through.

EU Commission President José Manuel Barroso, who spoke in Auckland just last week but gave no specifics, has most recently said planning is under way for a common bond for the euro area.

On Wednesday, trading finished with sharemarkets rising on comments by the French and German leaders that their three-way chat with Greece's prime minister that they will stick with moves decided at the July 31, including use of a financial stability fund and the issuing of euro-zone bonds.

But much still depends on whether the Greek government can fulfill its side of the deal against hostile public opinion. The rest of Europe, including the German taxpayers who largely fund it, have a right to be sceptical and to cut Greece loose.

One solution, put forward by US Federal Reserve historian Allan Meltzer in the Wall Street Journal, is a two-tier euro, which would allow a devaluation for the weak economies and create a new currency for those prepared to adopt common, binding or enforceable fiscal arrangements.

We have had enough clever schemes to protect bankers by shifting the cost of their profligacy to the prudent citizenry, Meltzer writes. Let the market work to end the problem by devaluing the troubled currencies.

Greece and taxes
The key to saving Greece from default, and for its government to start paying its way, is the collection of some €40 billion in unpaid taxes.

Its taxation agency is lazy and corrupt, and cutting state servanmts’ pay 20% is unlikely to change that. About the only taxes that are collected come from their salaries.

Another suggestion is to include taxes in electricity bills, a move commentator Dimitri Mitropoulos says in the Athens paper Ta Nea is an “admission of failure.”

The government is openly admitting that it has no trust in the mechanisms for tax collection – a sad commentary on the effectiveness of taxes up till now. This year and next year, the government will impose a new extraordinary tax. It’s taking this step because for 20 months it has been struggling in vain to reform public administration, to sell off assets and eliminate some public bodies.

For more on the euro:
• Germany plans for possible Greek default (Spiegel Online) – the case for a default, much detail on the background to the crisis and where it could go next.

• It’s the economy, dummkopf! (Vanity Fair) – an extract from Michael Lewis’ new book, Boomerang, which he describes as “financial disaster tourism.”

• Euro vision (Newsweek) – Lord Eatwell gives a basic guide to what went wrong for foreigners.

Short cut to Europe
Now might not be the time to head to Europe as a migrant but a Dutch newspaper, Trouw, has uncovered a legal backdoor that exists because the French have kept enough of an empire to have piece of South America that gives full European citizenship.

French Guiana is a de facto part of France, writes Ivo Evers, from the angle that it opens opportunities to former Dutch Guinea residents, who like New Zealanders are locked out of the EU.

“Every year, 13,000 people, mainly Surinamese, apply to us residency for permits. About a third of these applications are approved,” explains sub-prefect Hamel-Françis Mekachera. “It is the start of a long process, which eventually leads to the granting of French nationality seven years later.”

But the EU is making it increasingly difficult to pass through this door into its territory: “Paris has sent us an order to reduce the number of people we accept,” says Mekachera, “but this region is not perceived as a frontier by local people, who regularly cross the Maroni [the river that marks the border between French Guiana and Suriname]. It is not easy for us Europeans to deal with this, because there are no specific measures about it French law.

The comeback of illiteracy
I have some sympathy with the tirades of erudite and scholarly people against the tide of illiteracy that accompanies texting and Twittering.

It has become so endemic that when newspapers quote them – as they do so increasingly – they no longer put in the [sic].

One jumped out of the NZ Herald’s front page this week, quoting Wallaby star Quade Cooper:

“Just found out that @MirandaKerr Orlando bloom & there son Flynn were at our game yesterday…”

Historian Niall Ferguson (The Ascent of Money) is no doubt fighting a losing battle as he describes in Newsweek how young people are writing more but reading less:

According to the most recent survey by the National Endowment for the Arts, the proportion of Americans between the ages of 18 and 24 who read a book not required at school or at work is now 50.7%, the lowest for any adult age group younger than 75, and down from 59% 20 years ago.

He says the US is slipping down the civilisation ladder, with the gap between the reading abilities of 15-year-olds in Shanghai and those in the US now as big as the gap between the US and Serbia or Chile.