Europe Gets Sick Of Being Sick

Feeling bad is bad enough, but one of the worst things about a prolonged illness is that, after a while, you can hardly remember what it was like to be healthy. You get sick of being sick.

Europe has officially reached that point. Sunday’s elections in France and Greece, following earlier balloting in Spain, Portugal and other struggling eurozone nations, signaled that voters across much of the continent – with the conspicuous exception of Germany – are at their wits’ end over high unemployment, shrinking government services, rising taxes and cuts in pensions and other benefits. There may be no quick cure for their economic ills, but like a frustrated patient who turns to “alternative” medicine when science cannot help, they will give a shot to anyone who says he can make them feel better fast.

French voters ousted President Nicolas Sarkozy and replaced him with François Hollande, a Socialist. Hollande promised to push for “pro-growth” policies, which in his view include higher taxes on corporations, still higher taxes on targeted industries such as banks and oil companies, and a 75 per cent tax on individuals who earn more than €1 million (about $1.3 million) a year. He wants to raise the minimum wage in France, and he wants to re-negotiate the budget tightening rules that Sarkozy agreed upon with Germany just five months ago.

In Greece, Sunday’s parliamentary elections produced chaotic results, in which the two dominant parties received only about one-third of the total vote between them, while about eight other parties – including the neo-Nazi “Golden Dawn” – won enough votes to claim seats in the incoming legislature. Most of the fringe parties campaigned against Greece’s crucial agreements with its creditors, and it is not clear whether the new government will be strong enough to honour the country’s commitments.

If Greece reneges, it may very well be forced out of euro currency zone, and conceivably out of the European Union itself. It would also find itself cut off from the new borrowings that are keeping the country afloat. Greek voters have heard all this, but their frustration with the governing parties is so deep, and their denial of responsibility for their country’s condition is so strong, that they just do not care. German money is keeping Greece in business, but the Greeks resent the Germans so much that they have just put neo-Nazis into their own parliament.

The idea behind Europe’s recent balloting is that prosperity can be bought with government spending, even though the money governments spend must either be taxed or borrowed from the private sector. European leaders did not originally choose fiscal austerity because they wanted to retard growth. They chose it because there was no other option.

Europe’s themes will be echoed in our own upcoming election. President Obama and his supporters will make arguments similar to Hollande’s: that growth can be bought with more government spending and with higher taxes on business and the rich.

The difference is that Obama has implemented those policies – at least the spending part – for more than three years, to little effect. Mitt Romney will spend much of the campaign pointing this out.

He’ll be betting that American voters are as sick of their sick economy as Europeans, and that, having tried the Obama prescription of unbridled spending, they might be ready for different medicine.

For more articles on financial, business, and other topics, view the Palisades Hudson newsletter, Sentinel, or subscribe to my daily opinion column, Current Commentary.

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