On Point: Will Corruption Kill the Euro?

by Austin Bay
June 22, 2010

In a box in a drawer, I've a dozen Deutsche marks, a fewFrench and Belgian francs, Italian lira, Spanish pesetas, Greek drachmas,Turkish lira and British pence.

After the European Union adopted the euro as its officialcurrency (January 1999), my traveler's spare change collection -- excepting theTurk and Brit coinage -- eventually became numismatic souvenirs.

The conventional wisdom at the time pushed a narrative ofinevitable Euro-progress. At some point, the Euro-zone (nations using euros)would expand, and the Turkish lira and the perfidious British pence, too, woulddisappear.

Now, however, the Euro-zone faces a crisis catalyzed by thepotential default of big spending, low productivity nations -- Greece, Spainand Italy, with Portugal and Ireland also in trouble.

Greece teeters on the edge. The Wall Street Journal's PaulHannon wrote this week that "the failure of its (EU) systems formonitoring and controlling build-ups in government debt" are why thebailout loans given to Greece by the International Monetary Fund (IMF) andfiscally disciplined EU members like Germany became necessary.

He's right. "Failure of its systems formonitoring," however, is a euphemism -- economic diplo-speak for a verydifficult word: corruption. Greek governments cooked the books (its actualdeficit is twice as high as officially reported), violated fiscal agreementsand borrowed money they could not repay.

Corruption lies at the dirty core of the Euro-zone'strouble. Governmental corruption and its cohort, illicit business practices,are a pervasive, multicultural, global affliction.

Corruption coupled with systemic lack of accountability --to include personal accountability, where managers and workers letlackadaisical and lazy work practices slide -- eventually produces more thananger, cynicism and financial turmoil. Even among economies in the developedworld, it stunts economic productivity, robs the future and sows the seeds ofarmed conflict. In the developing world it undermines aid efforts, manaclesfragile economies and as a result condemns millions to poverty.

Transparency International (TI) ranks Greece and Romania asthe most corrupt nations in Europe, tied for 71st internationally. TI alsoprovides a stunning statistic: In 2008, 13 percent of Greek households paid abribe. The Greeks call it "fakelakia" (little envelopes), but themoney is huge, around $950 million to public and private bribe-takers.

The Greeks know it. Reuters cited a Greek poll, taken inearly June, which found 78 percent of the Greek people "accept the viewthat many or all in government are corrupt." FoxBusiness.com reportedGreece's finance ministry "has discovered rampant tax evasion andcorruption, including bribery, in its own tax collection offices." Thefinance ministry is investigating "70 government officials who make about$62,000 on average a year, but own anywhere from $982,000 to $3.7 million inreal estate." Greek tax evaders cost the country $27 billion a year. Lastmonth, the EU and IMF loaned Greece $120 billion. You do the math.

 Greeks working ininternationally linked businesses, like tourism, face the consequences of thiscorruption. Earth Times quoted a guesthouse owner on the island of Ikaria ashoping "the firm focus of international attention" may help Greece"combat its homegrown corruption and government waste."

That's an anecdote from a businesswoman in the fiscaltrenches. Ikaria is where the mythical Icarus' body washed ashore. With wingsof wax and feather, Icaurus and his father, Daedulus, escaped from Crete, butIcaurus, despite dad's warning, flew too close to the sun and his wings melted.Icaurus didn't lie, but he lacked discipline -- thought he could do his ownthing. He plunged into the sea. Hotel operators understand the myth's 21stcentury relevance.

The big idea driving the euro and the European Union waspolitical -- to create a larger common interest based on linked economies.Perhaps growing common interests would ultimately forge a common identity, orenough of one to end Europe's destructive wars, especially those pitting Franceagainst Germany.

That is still a very good idea, which is why a European"common market" makes sense. Honest trade builds bridges. A commoncurrency union, however, which lets crooks in Athens pick the pockets of aFrench farmer or German brewer, seeds conflict.

The D-marks and francs in the souvenir box may have afuture. 

Read Austin Bay's Latest Book

To find out more about Austin Bay and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.


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