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THE CONSERVATIVE REVIEW - May 21, 2010

Will the PIGS Blow Up Europe?
by Pat Buchanan

Among the mega-forces moving the tectonic plates and
imperiling the nation-states of the world from above
and below are these:

First, ethno-nationalism, which threatens nations with
secession and break-up. We see it in the Uighurs of China,
the Naga of India, the Baluch of Iran and Pakistan, the
Kurds of Iran, Syria, Iraq and Turkey, the Chechens of
the Russian Caucasus and the Walloons of Belgium.

Second, transnationalism. This is the project of global
elites who seek to reduce nations to ethno-cultural
enclaves in a new world order run by these same bloodless
bureaucrats whose loyalty is neither to the land nor
people whence they came.

Their work in progress, the European Union, however, is
imperiled.

For the EU just took a great leap forward to force
Europe's most indebted nations to surrender their economic
independence or be expelled from the European Monetary
Union. The PIGS -- Portugal, Ireland, Italy, Greece and
Spain -- may rebel.

Indeed, we may see cascading rebellions across Europe
recalling 1848, but with a different outcome.

What brought the EU to this day of reckoning is its
decision to go for a trillion-dollar bailout of Greece,
Portugal and Spain rather than let them default or
restructure their debts. These nations are now being
directed by the EU and International Monetary Fund to
slash public spending and raise taxes, though all suffer
from high unemployment, with Spain's at 20 percent.

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If Berlin gets its way, these nations may also be forced
to submit their budgets in advance to Brussels and accept
EU-dictated limits on the deficits they will be permitted
to run. This would entail a sweeping surrender of
sovereignty, independence and economic freedom.

Moreover, as the pain of this "rescue" is to be borne by
the debtors, while the beneficiaries are the French and
German banks that hold tens of billions in PIG paper, this
question arises: Why should Athens make Greeks suffer and
risk political ruin at the polls, rather than default and
let the banks and bondholders of Europe share in the pain?

Why not quit the EMU, default, repudiate the euro, restore
the drachma and devalue? That would make Greek exports
more competitive and make Greece a more desirable place in
which to site one's next factory. And with its currency
devalued, Greece would also become a more attractive
destination for Western tourists.

But a Greek default is not the only threat to the EU.

The European Central Bank has been buying Greek debt from
the banks both to relieve them of the risk of a default
and to restore market confidence in Greek, Portuguese and
Spanish bonds. Only when such confidence returns will
investors buy new debt from the Club Med countries, all
of which must issue new bonds to finance deficits and roll
over maturing debt.

A problem, however, has also arisen here. As the ECB is
buying up the debt of the PIGS, holders of Greek, Spanish
and Portuguese bonds are unloading them, getting out of
Club Med paper while the getting is good.

The ECB seems to be substituting itself for the banks as
the chump to be left holding the bag when the defaults
begin.

The plunging euro is a sure sign the markets are coming
to see that the only way the bonds of indebted European
nations are going to be paid off is with a huge infusion
of euros, which may end that currency's status as a
reliable store of value.

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However, "if the euro fails, it is not only the currency
that fails," says German Chancellor Angela Merkel. "Then
Europe fails. The idea of European unity fails."

Especially enraged are the Germans. To show that they were
good Europeans, they gave up their beloved mark. Now, in
recent elections in North-Rhine Westphalia, the Christian
Democratic Union of Merkel took a thrashing, falling 10
points below the CDU's 2005 vote, and losing the upper
chamber of the German parliament.

Germans may be ready to shed the sackcloth and ashes they
have worn for 65 years and start looking out for Deutsch-
land uber alles.

Given the strains on the European Monetary Union and EU,
neither of which enjoys the love or loyalty that people
render to the countries of their birth, the great unravel-
ing may be about to begin. Why, after all, should the
indebted nations of Europe impose suffering upon their
peoples to pay off old debts now held by distant banks?

How does imposing austerity on Portugal, Spain and Greece
enable them to grow their way out of indebtedness? How does
it help the EU grow if a large slice of the union is forced
into austerity?

And why should Germans who pay themselves modest pensions
and hold off retirement put their savings at risk to bail
out the Club Med?

Many have predicted that economic nationalism would one day
tear apart the European Union. The hour may be at hand.

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