15 things the Greek austerity vote won’t accomplish

The Greek parliament's austerity vote accomplished one thing. It advanced the possibility of a deal that will pump enough cash in the direction of Athens for the country to pay off its creditors. Here's what it will not do:

• It won't guarantee that Greece sticks with the plan that's approved. Riots in the streets illustrate that the people of Greece are deeply unhappy with what they perceive as a foreign-imposed squeeze. They can force a political reversal that leads to a policy reversal.
• It therefore won't ensure that Greece remains a part of the Eurozone…just as this is only the latest flare up in an on-going crisis, others in the future could produce the breech that that Europe's financial leaders have been trying to avoid.
• It won't help Greece -- or the other countries of Europe's southern tier -- avoid a protracted recession. Which in turn will mean protracted tension between those countries and the rest of the EU.
• It won't address the structural defects in the EU that are a far greater threat to the future of the Eurozone than the profligacy or over-borrowing of the Greeks. Until there is fiscal union to go with monetary union, the Euro is a currency backed only by huge reserves of denial and delusion.
• It won't fix the serious problems that exist in other even more important Eurozone countries -- notably Spain. With a real estate market that looks scarily like that in the United States circa 2007 and its own serious fiscal issues, Spain is the problem this latest anticipated Greek bailout is intended to avoid. But as history has shown with Iceland, Ireland, Portugal, and Greece 1.0, in the Eurocrisis, the "Lehman Brothers moments" seem to come and go...and then come right back in some new form.
• It won't address the fears of the Germans (not to mention the French, the Finns, the British and others) that they are now permanently on the hook for the missteps of politicians in far off lands with different cultures, different agendas and a seeming appetite for moral hazard. The folly of bureaucratically willing a "union" into existence is thereby again revealed. It took the United States 100 years and the bloodiest war in human history to come to grips with the idea that the separate states were in it together for better or for worse. Europe has had the wars, but it has yet to accept the concepts of a truly shared fate and common responsibilities.
• It won't address the systemic flaws that allow major financial institutions to be the enablers of profligacy while they turn a blind eye to the true credit-worthiness of their clients, cash their commission checks, and then work to make money on the messes they have helped create.
• It won't help Europe deal with the demographic crisis that may be even bigger than its financial crisis…a crisis caused by aging societies and shrinking labor pools that will be increasingly unable to support retired populations. One expert with whom I recently spoke said that for Europe to seek to make up the gap by embracing legal immigrants -- something many countries in the region are extremely reluctant to do -- they would have to increase the rates of immigration by over 30 times what they are today. Not going to happen.
• It won't help Europe deal with what is going to happen on the immigration front ... the problem signaled by Denmark's decision to close its borders in contravention of the EU's open borders accord. Take tensions between the member states and add the demographic time bomb cited above and Europe faces a looming cultural crisis (which will be seen by many as a labor market crisis) and which could trigger more nationalism and the further rise of the right.
• It won't help Europe deal with its increasing dependency on Germany, the clout that will give the Germans...and the leverage and role that gives the Chinese upon whom the Germans are depending to buy their products. Consequently, a slow down in China ... triggered perhaps by policies designed to contain commodity price inflation in that country...could have big consequences for Europe.
• It won't help Europe deal with contagion it might face not only from the likes of China but from the other bastions of developed world economic strength -- the United States and Japan, both of whom are home to political leaders who seem bent on doing everything in their power to make dire situations worse.

It also won't reduce Europe's vulnerability to upheavals in the Middle East and North Africa, address the problems caused by growing dependence on Russian gas that is the direct implication of Germany's decision to shut down its nuclear power generating capacity, address the deep flaws in its common foreign policy mechanisms that have been revealed by the seemingly endless war of "days not weeks or months" in Libya, or somehow address Europe's inability to produce decent pop music.

In short, yesterday's Greek vote may have soothed markets temporarily ... but it is nothing more than the latest effort to treat the symptoms of Europe's ills while steadfastly ignoring the underlying disease.

http://rothkopf.foreignpolicy.com