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.

go to forbes.com

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

Swiss Try to Shut the Flood Gates for French Capital Flight

A well-informed colleague related to me that he had spoken with Swiss banking authorities trying to stem the flow of French capital into Switzerland. Wealthy French families have been spooked by the election of a socialist president threatening them with 75 percent tax rates. They cannot park their money inside the Euro zone; so they are flooding  Switzerland and England with capital flight.  The Swiss will likely impose a "parking fee" on incoming capital high enough to keep it within manageable proportions. If not, Swiss tourism and exports will be priced out of the market and the Swiss economy will take a nose dive. New York City realtors are also reporting French purchases of high end real estate.

Capital flight is the last thing France needs given its pressing borrowing constraints.

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