Who’s to blame for the Euro crisis?

The mediteranean eurozone countries seem to want to blame all their economic problems on Germany and the eurozone economies in the northern half of Europe, the ECB and the IMF, as a reaction to their demand for strict austerity measures and far reaching reforms.

The eurozone appears is in recession, but countries in southern Europe have been playing their typical games since joining the euro at birth. Who doesn’t remember the wine lakes, the cheese mountain, the sea of olive oil that turned out bigger than than they could physically produce?

These countries have been promising Brussels structural and public sector reforms in their domestic markets, but have so far done very little to change their old habits and open up there restricted domestic markets to real competition. Greece for instance requires 36 permits to sell an Aegean island to a foreigner. There is a huge list of potential buyers, but how many have been sold so far? Zilch, nada, nothing.

They all got away with this clever ruse of foot dragging and excuses, but the chicken have come home to roost now. Their budgets are being scrutinized by Brussels, which means that there is no room for imaginative Greek accounting, making the numbers look rosy when in fact they are bleak.

Why has GDP growth in southern European countries fallen so far behind northern countries? Northern eurozone economies are much more open minded in their approach to open markets, while southern eurozone countries are much more protectionist in their domestic markets.

There is still only one electricity supplier in Portugal, EDP, even though Lisbon has been telling Brussels it will allow more competition in its energy market, but has done nothing to change the situation. The status quo is all too cosy and corruption no doubt syphons off large amounts. Why break up this nice little earner?

The telecom, banking, and energy markets across southern Europe from Lisbon to Athens are all suffering from the same sclerotic disease. This is why Italy, Portugal, Greece and Spain won’t grow their economies. Maggy Thatcher, with all her faults, got rid of state monopolies in Britain yonks ago and the UK has weathered the storm so far. Spain only managed to grow thanks to a property boom and not through liberalising their economy

Real economic reform is what is now required in southern Europe. Governments need to break up all monopolistic tendencies. Pharmacists for instance, are still blocking the sale of painkillers in supermarkets, because they can charge 6 times as much when they have the monopoly on it. Taxi drivers and lawyers are blocking reforms that would bring down the high prices they charge. Do their industries really need protection? It works in northern Europe without all this red tape.

On top of that they will also have to address their bloated government apparatuses that are now larger than their private sectors. Without producing real goods their economies won’t survive. Do they think they can export their paperwork to a willing China, India and Brazil? Think again!


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