Whatever happens tomorrow, it is sure mark a significant moment on the timeline of the European Crisis. That Retired Guy (TRG) will go out on a limb here and predict that Hollande will win in France, and in Greece, the main parties will receive a painful message from the electorate, but continue to run the country.
The result of the election will get a lot of attention from commentators everywhere, although the immediate impact will probably be limited. Financial markets may wobble next week, but things will return to the usual uneasy calm soon enough. That is not to say that this will not be seen as an important election, as this crisis has already demonstrated, single events are not shaping the world, rather, we are suffering the crisis more as a cancer that slowly consumes us. Nonetheless, even in the slow death of cancer, there are significant turning points.
The is hard to exaggerate how bad the situation in Europe right now is. Every government has become painfully aware that the financial situation presents an existential threat to the European Union, and by extension the regional political order of the past 60 years. It's not hard to imagine scenarios that involve dark forces sweeping to power and returning Europe to a state of violent conflict that was so common before WW II.
The cause of the crisis is simple, there is more debt then people or governments can easily pay, all across Europe, in fact, all across the world (especially in the United States, and Japan, but basically everywhere). This, of course, raises an interesting question. Why is only Europe in crisis, and why NOW? These will remain highly debated academic questions for a millennium, but they are not actually relevant to the current situation. It doesn't matter WHY the crisis has hit now, it was probably inevitable for some time what matters is how we resolve the issue, and move on.
There appear to be no easy or good solutions. The solution that is getting the most attention now is austerity. Governments everywhere are increasing taxes, and cutting spending. This remedy is not proving successful, probably because financial responsibility is really only effective at PREVENTING a crisis. Once the crisis has started (as we have seen) it doesn't resolve the issue. It's a bit like using fire prevention techniques (fire alarms, smoke detectors, extinguishers) to fight a raging fire. These things are useful to keep a fire from starting, or getting to extreme, but once you have an inferno, the only thing that's going to make a difference is lots of firetrucks.
TRG has been watching the events unfold closely. He is also absorbing the literature of past financial turmoil to gain some prospective. Some useful books:
This Time Is Different: Eight Centuries of Financial Folly
The Great Depression, A Diary
Debt the First 5000 Years
History has much to teach about financial crisis, although it's pretty worrying stuff.
We are not headed for a easy or fun time. 'This Time is Different' makes the case that whenever a nation finds itself in deep financial trouble the result is generally default often followed by war and/or revolution. In fact, they point out that most wars and revolutions have some financial aspect where the conflict can often be framed as an argument over a real or perceived financial debt.
TRG will devote the next post to the possible resolutions being discussed and their likelihood of resolving the current situation, but today (actually, tomorrow) let's just sit back and watch as democracy makes another great show of public choice without any real choice being presented or made.