The Greek Vote, Blame Germany, and the Forgotten Reforms

Greek, French and Egyptian voters went to the polls today. In what was supposed to be a turning point for Egyptian democracy, voters turned out in small numbers to cast their ballots for the Muslim or establishment candidate. They well understood the military had assumed control and the election was meaningless. In Europe, Greek voters remained evenly divided between the center-right and the Left, which promised to jettison the austerity of the Euro bailout agreement. Although preliminary results suggest that a pro-Euro coalition may achieve a fragile majority, it is sure that Greece will continue to muddle along from crisis to crisis. Europe needed clarity but got more confusion. The Greeks did not vote to leave the Euro, and no one wants to be responsible for pushing them out. Greek voters reckon that Europe will bail them out unconditionally rather than risk Greece’s departure from the Euro. Quite a gamble, but it may be a winning bet.

In France, electors gave their new socialist president Hollande a solid parliamentary majority to support his pro-stimulus and pro-welfare state policies. With two elections out of the way, attention turns tomorrow to Mexico where the G-20 leaders can pontificate and agree on general principles while deciding nothing.
Sunday’s votes took place against the drumbeat of blaming Germany for all that ails the Euro zone. If only the miserly, self-centered Germans would lend a helping hand to their deserving neighbors, all these troubles would go away. The blame-Germany narrative gives the weak European countries an excuse for not taking tough action, and the facts show that Germany’s stingy reputation is undeserved.

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Dr. Gregory's latest book can be found at Amazon.com.

Hollande Wins and Europe Descends into No-Man’s Land

Socialist candidate Hollande has won the French election as expected. His high-tax, pro-stimulus, welfare-state-protection platform, in effect, scuttles the Eurozone rescue program engineered by Merkel and a reluctant Sarkozy.

Hollande’s election leaves the European Union with three stark choices, none of which are good: 1) Germany and the European Central Bank cave and bail out any and all debtor countries under the cover of some fictitious future fiscal discipline, or 2) The Eurozone countries muddle along from one band-aid fix to the next as the bond vigilantes breathe down their necks while they hope to catch a break, or 3) Germany and the Nordic states withdraw from the Eurozone to their own currency. The rest of the Eurozone can stay on the devalued Euro or revert to their own currencies.

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Dr. Gregory's latest book can be found at Amazon.com.