The Solution to Europe’s Problems: Right Here.

A lot of European nations are in pretty sorry shape, economically speaking. Virtually all of the Mediterranean nations – Spain, Italy, Greece, France, and Slovenia – in addition to Portugal, Slovakia, Hungary and Ireland have some serious issues to deal with. All of these nations suffer from massive Welfare States. For the most part, they also suffer from massive labor union entrenchment, meaning crippling labor regulation. As long as these nations cling to their welfare states and allow labor unions to remain legally entrenched, recovery for these nations will be much more difficult. It may even be impossible.

Current President of Italy Giorgio Napolitano has gone as far as to warn of “violent revolution” in Italy if conditions do not improve. As reported in an editorial in The Guardian:

Events in Italy are turning serious. President Giorgio Napolitano has warned of “widespread social tension and unrest” in 2014 as the Long Slump drags on.

Those living on the margins are being drawn into “indiscriminate and violent protest, a sterile lurch towards total opposition”.

His latest speech is a veritable Jeremiad. Thousands of companies are on the “brink of collapse”. Great masses of the working people are on the dole or at risk of losing their jobs. Very high rates of youth unemployment (41pc) are leading to dangerous alienation.

 “The recession is still biting hard, and there is a pervasive sense that it will be difficult to escape, to find a way back to full growth,” he said.

Mr Napolitano offers no answer. A former Stalinist who applauded the Soviet invasion of Hungary in 1956 (a youthful indiscretion), he has long since switched his ideological fervour to the EU project. He is by nature incapable of questioning the premises of monetary union, so don’t expect any useful insights from the Quirinale on how to break out of this impasse.

He does concede that the eurozone crisis “has put a severe strain on social cohesion” but leaves the matter hanging, his argument unfinished, more descriptive than analytical.

Without going as far as to warn that the Italian state itself is at risk, he said the growing threat from insurrectional forces must be confronted. The law must be upheld strictly. The country must continue to be governed. “Europe is watching us,” he said.

This is somewhat surprising. Napolitano is a hardcore establishment figure in Italy. The last thing someone like him should want is to rock the boat. This gives banks and businesses the jitters. Investors flee from national markets when they hear “violent revolution”. This is why I am interested by this talk: He must actually believe this is a possibility.

All of the aforementioned nations are seeing a rise in social tensions and protest movements, some worse than others. Youth unemployment in these nations is staggering: Over 50% in Greece, down to the upper-20% in France. 18-24 year olds perceive no future in their homelands. Under the reigning paradigm, they are correct.

I know exactly how to solve the problems these nations are facing. It’s simple.

First of all, the governments of these nations need to cut all ties to labor and trade unions. All bureaucracy related to labor and unions needs to close. Currently, it is difficult for businesses in these nations to fire people; that must change. Workers need to be able to get canned whenever and wherever for whatever reason. All labor regulation needs to disappear. Minimum Wage? Gone. Mandated vacation days? Gone. Certifications, licenses, qualifications? No longer required by the State. The employment agreements between workers and businesses need to be 100% hermetically sealed from third-party (government) interventions.

The above changes will make employment in these locales competitive again. Currently, the price of employment in these nations is too high. Strict minimum wage laws and crippling labor regulation make employment too expensive to provide for most employers. This is what’s killing Youth Employment; they cannot compete against older workers because of the Minimum Wage, among the other mandated benefits.

Next, these nations must halt their welfare machines. Not a single eurocent further should be doled out to anyone, anywhere, at all. No subsidized food, medicine, income, nuthin’. No government pensions or their equivalencies of Social Security. End it all. The socialized pension and healthcare systems in these nations are bleeding them dry.

Next, these governments would pull out of the Eurozone. No more Euro; go back to whatever currency they used before. They would also refuse to take any more orders from the Eurocrats in Brussels, even pulling out of the EU if necessary.

Next, these governments would cease to bail out any bankers or businesses. Any bank or business going under would be left to go under. It doesn’t matter if people would lose deposits/jobs. These governments can no longer afford to be accommodating of poor decision-making and outright crookery.

Next, these governments would lift all trade restrictions. No tariffs, no import taxes, no quotas, no protectionism. Anyone could buy or sell whatever they wanted with these nation’s citizens at any time with absolutely no interference from the government; in short, unfettered free trade. No price controls, no mandated minimum or maximum prices. Goods would be free to cross the national border without any taxation or fee. The government would not interfere with the price system in any fashion.

Next, these governments would rescind all extraneous rules on banking within their borders. The only rules enforced would be for actual crime, like fraud and theft. Otherwise, these nations would convert their banking sectors into little Switzerlands. Total secrecy, no mandated reporting on accounts, no seizing assets at the behest of foreign governments. The key term is “tax haven”. These nations should strive to be the strongholds for tax evaders all over the world.

Next, these governments would totally overhaul their tax systems. Taxes would be kept amazingly low (I’d rather they not exist, but I’ll play ball for now.) No more progressive income tax; replace with a low flat-rate tax, less than 10%.

Finally, and perhaps most importantly, the governments of these nations would default on their national debt. No shame. It can be as simple as, “We decided not to pay. Sorry.” Government Bonds would become worth zero. The national debts would disappear.

Any government that did this would truly be undergoing a revolution. The turnaround elicited from this would be unbelievable. Any single nation that undertook the above changes would become economic powerhouses with surging employment and investment within 2 decades. They would surpass even Germany. It would be a replay of late 1800s America all over again. My heart quivers with excitement at the thought of any nation who makes these changes and actually sticks to them for a long period of time. The transformation would be magnificent to behold.

Will any of the troubled European governments actually do this? Reality check: Of course not. The Welfare mentality is ingrained into the psyche of most of these nations, most especially Greece, Spain, and Italy. They lack an overall hard-work ethic. Germany and the Scandinavian states are able to operate Welfare states with less trouble because of their freer markets and cultural hard-work ethics. These ethics, widespread in Germany and Scandinavia, are not widespread in most other Eurozone nations. They want a welfare state, but they don’t want to work or save for it. They don’t call them “Club Med” for nothing.

Violent revolution in Italy? Maybe, but it hardly matters. Unless the revolution is based on dismantling the bureaucracy and freeing markets, their situation will not improve.

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