Not Enough Fingers to Contain the Leak in the Dike

As I have repeatedly stated "Eventually, Will Come a Time When .... "a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and (correctly) declare all the "bail out" debt foisted on their country to be null and void. That person will be elected."

Predicting when and where that happens is not easy. We have been following Greece, Spain, and Italy.

Could it be another country that gets the ball rolling? Actually, the most likely occurrence will be in a country that few are watching.

Please consider Dutch support EU referendum

Dutch lawmakers have been forced to debate a referendum on any further transfers of power to the EU after a citizens’ petition demanding a plebiscite garnered 40,000 signatures in two weeks.

Although parliament is not obliged to follow through with legislation, the move underlines the surge euroscepticism in one of the EU’s founding members, which could pose an obstacle to any further integration needed to bolster the eurozone.

Obligations? What Obligations?

Politicians are never under "obligation" to do anything. However, they are subject to voter backlash. In gerrymandered legislative districts in the US, voters do not have much of a chance.

Elsewhere, that is not necessarily the case as shown by the massive rise of support for comedian Beppe Grillo whose Five Star Movement is now the largest political party in Italy.

Justified Backlash

I am not the only one to note the justified backlash against the nannycrats. Pater Tenebrarum at the Acting Man Blog says a "storm is Brewing" in his article called Tone-Deaf Eurocrats

What makes Grillo suspect to the eurocratic elites is that he is an anti-establishment figure; that he doesn't regard euro membership as sacrosanct, and intends to increase the level of direct democracy in Italy. This is not to say that the man's economic policy ideas are necessarily better than what has been on tap so far, as he has a number of ideas that strike one as steeped in a kind of naïve romantic socialism.

The problem the EU faces is however that one cannot simply continue to ignore the increasing political backlash across Europe. In fact, Grillo's ascendance appears a relatively small problem compared to what could possibly happen if a few more years with no light at the end of the tunnel pass. Desperate people will eventually flock to anyone who promises them to shake off the yoke of EU diktats, and that could well lead to the baby being thrown out with the bathwater.

 The central problem is then how exactly to achieve economic growth, and it can certainly not be achieved by deficit spending or manipulation of the money supply. There can be only one way: radical pro free market reform. Rehn and his colleagues in the eurocracy in the broader sense (i.e., including the national political leaders) must be prepared to surrender control and let the market economy work in as unhampered a manner as possible. The questions they should be asking themselves are: 'How can we do less? What regulations should be dismantled first? Which taxes and what spending can we cut as quickly as possible? What is the quickest way of replacing the the central bank directed banking cartel with free banking?'

Everything else is essentially a waste of time and effort, even if it should prove possible to kick the can down the road repeatedly. The current course is certainly fated to end in tears – eventually the political backlash will produce chaos, and usually chaos doesn't end well. As the protesters in Portugal have correctly intuited, it only tends to bring even worse snake oil sellers to power.

No Light at the End of the Tunnel

Pater wonders what might happen in a "few more years with no light at the end of the tunnel".

I rather doubt we get that far, and I am rather certain Pater would agree. Regardless, with all eyes now focused on Spain and Italy (way too late), it's time to move the spotlight to France and the Netherlands.

Eventually this mess is likely to blow sky high in multiple places at once. There are not enough fingers to contain the leak in this dike.

Addendum:

Apologies for originally misspelling dike as dyke. It was not intentional. I rushed a post, heading out the door for a party.
Mish

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com