For those who still have the patience—or the sick curiosity—to follow Europe’s parody on democracy and the rule of law, it’s been a fascinating few days.
Forget Greece and Portugal: fiscal consolidation in Spain and Italy isn’t going particularly well, either. In both countries, the lack of progress has a great deal to do with fiscal federalism’s pathology—i.e., the tendency of junior government to rack up debt and to gamble on a federal bailout. (I’ve droned on about that unfortunate tendency in a series of earlier posts.) In Spain, the regions (which account for the lion’s share of the Country’s excess debt) seem to be winning the game of chicken: the already-bankrupt government in Madrid is sending money their way, in return for empty promises. My buddy Alberto Mingardi’s terrific piece on the Italian situation appears here.
The EU is hardly an innocent bystander. For decades, it has been buttering up regions financially as well as politically, on the theory that what’s bad for nation-states is good for the EU and to the point where it’s hard to explain why Spain or Belgium still exist. They are the functional equivalents of insolvent pension funds with a colorful flag and a Chairman who answers to “His Majesty.”