by Victor Davis Hanson
NRO’s The Corner
Watching the current EU dramatics over southern Mediterranean debt reminds me of the farm crisis of 1982–4 when lots of big farming concerns around here defaulted on what they owed banks. At first, the banks with tough talk demanded sharp cut-backs, immediate overdue payments, taking your medicine, and gave lectures to sloppy agribusiness people about the insanity of buying vastly overpriced land in the 1970s. But eventually, whether privately or publicly, the debt for the largest concerns was largely restructured or partially forgiven, I guess on the premise of too big to fail or some such realization that banks needed interest and some was better than nothing. Each month the press coverage seemed to evolve from greedy agribusiness trying to over-expand to greedy banks lending money to aspiring producers that no sane person could believe could be paid back.
Germany won the first round of mandated austerity, but it was not enough to guarantee much of a payback and far too much a change for the southern Mediterranean way of life. At some point, the stakes will escalate to something like full default, on the thinking that what may be catastrophic for the debtors will, in truth, be only be bad (in the sense of going back to the pre-EU Greece or Italy), and what is bad for the Germans will be seen by them as catastrophic.
It was immediately obvious that Germany was being used, but in the press not so obvious in this strange interdependent relationship that Germany also got political, cultural, and economic benefits from loaning hundreds of billions of euros to buy German things to those who were only able to pay (for a while) the interest on the rising debt.
When the EU splits up, whether politically or fiscally or both, Germany will eat a lot of debt, will become the object of regional suspicion and fear, will no longer be seen as the long-suffering and unfairly caricatured sober and judicious linchpin, and will lose a lot of its easy markets and EU protectionism under its prior musical chairs sort of mercantilism. Already the fickle world press is turning from stories of conniving Greeks who finagle retirement at 50 and welch on their taxes to noble destitute Greeks who are reduced to scrounging for aspirin disappearing from their pharmacies, while Germans have gone from thrifty and admirable workaholics to the new Gauleiters.
In 1983, one subdued farmer told me, “I shouldn’t have borrowed the money”; by 1985, he beamed, “Well, they shouldn’t have lent me the money.”
©2012 Victor Davis Hanson