Friday, September 10, 2010

Trichet: Eurozone won't admit countries like Slovakia

As we have learned from Reuters and others, the European Central Bank's chairman, Jean-Claude Trichet, is furious about Slovakia's refusal to subsidize the Greek freeloaders.

(If you need to know, "triche" means "cheats" in French.)

He has revealed that had he known that Slovakia was going to refuse to participate in similar money transfers, his ECB would have vetoed the Slovak accession to the eurozone. Also, he said that if there are other countries that are at risk of misbehaving in the same way, he will veto their entry in the future.

Greece, for its failure to fulfill the accession criteria (before it fabricated its paperwork) and for having behaved in the most irresponsible way, has received hundreds of billions in gifts from the likes of Trichet (of course, paid from other pockets). However, Slovakia which has honestly fulfilled the accession criteria, which kind of knows how to be fiscally responsible, and the last country that was actually defending the original rules of the eurozone - that were banning transfers such as those to Greece - gets trashed. That's the eurozone version of justice.

His statement obviously means that the ECB under Trichet won't allow the Czech Republic to join: the Czech Republic is the first country that is "like" Slovakia. The only good news here is that no one in the Czech Republic really wants to join them, anyway. ;-) The new right-wing Slovak government has shown its fiscal responsibility and principles and I applaud it.

But I still think that the new Czech right-wing government (it may be almost the first time when post-1993 Czechia and Slovakia became "synchronized" in the political orientation of their governments) would be even more principled in its efforts to torpedo similar acts of moral hazard. And I think that Trichet knows it very well. So his pronouncement was primarily about the Czech Republic.

The eurozone is a contrived, artificial construct because it is not an optimum currency area and its citizens do not share their national identity or genuine solidarity, either. However, because it was already created, I still think that it is important to realize that the eurozone is not a new country, family, company, church, or sect: it is just a region that shares a currency.

An Arab and a Jew may share gold or U.S. dollars as their preferred currency for payments or savings but that doesn't mean that they will share a credit card and buy pink pillows for their new bedroom. Quite on the contrary, it is more likely that one of them will throw the second one to a chasm. The Chinese were not considered to be compatriots by the Americans even though they had a de facto (Sino-American) currency union with the U.S., either. Obviously, almost the same thing holds for the euro, too.

The ECB's task is to preserve the value of the euro: its task is not to impose a non-existent compassion on the member states or to organize international money transfers, especially not transfers from a relatively poor member who works hard to a nominally wealthy member who doesn't work hard but who wants to keep his pensions that he cannot afford and that are 5 times as high simply because he's used to them.

There exists a substantial opposition to this kind of subsidizing of Greece in Germany.

You must realize that the fiscal responsibility in Germany, Czechia, and Slovakia is very similar in extent and character. The Czechs have been trained by centuries of German influence (and genetic mixing) which is one of the reasons why these things simply are similar. And even if the Slovaks were miseducated by the fiscally irresponsible Hungarian attitudes during the Hungarian empire, we have taught them better during the years of Czechoslovakia. ;-)

However, in Czechia, and especially in Slovakia, average people are also pi times poorer than in Germany which makes similar aids even less acceptable to the electorate - and the politicians who reflect the voters' will.

A strikingly different example are our Southern Slavic cousins in Slovenia, a small nation of former Yugoslavia that has joined the eurozone years before Slovakia. They seem to be obsessed with a plan to dissolve their nation in Europe and to be more politically correct than their nearest European competitors. They just don't seem to have any national identity, pride, or national interests anymore. It's OK with me - it's their identity - but it's simply a fact that not everyone has to be thinking in the same way and not everyone is thinking in the same way.

Political but off-topic

The (Iranian) Bomb, originally Sex Bomb by Tom Jones, a new global music hit. I am amused how similar the Persian accent in English (as imagined by the Israeli) is to the Czech accent.


  1. I believe that Czechs are uneasy about their country being called "Czechia", as it reminds them of the years of German occupation during WWII. The genetic mixing, the author refers to, would have been with Austrians rather than with Germans, and they're somewhat different people culturally and fiscally. Besides, the R1a marker amongst Czechs is about as strong as it is amongst Poles, so there had not been so much mixing anyway. But the point about the Slovak's and the Czech's fiscal rectitude vis-a-vis Euro-corruption is well made.

  2. Lubos, how do you display mathematical characters in a blog? I can't do it at

  3. Dear Pmer, over the years, I've tried about 5 (working) methods to include maths to blogs and none of them survived. They always require something special and it's just annoying. Try to search for mimetex, techexplorer, latex equation editor, and others.

    Dear Gustav,

    I don't know which Czechs are uneasy about "Czechia". Most Czechs don't even speak English. The counterpart of the word in Czech, Česko, has become fully acceptable and kind of frequently used by everyone, especially because it's been used in sports for more than a decade now.

    The German word that doesn't sound excessively flattering (and has protectorate-like memories in it) is "Tschechei" which has a different ordering of "e/a" and "i" at the end, notice the difference! The counterpart of "Czechia" in German is really Tschechien which is equally OK as Czechia but it's a word that's been used for a much longer time.

    Moreover, most older Czechs have encountered Russian language at schools, and Russian has used "Czechia" - pronounced almost exactly in the same way as in English - long before this word was newly created for the English language.

    I am not sure whether I understand your views on the Austria-German differences. But yes, the influence was mostly from Austria.

    Because of cultural reasons, I view Austria (and the empire during feudalism) to be nothing else than "another land of greater Germany", just like Prussia. After all, Österreich means the "Eastern Empire". How is this East measured? Well, it's measured relatively to the whole German-speaking living space. Austria is the eastern land of the Germans.

    Austria has also been a cornerstone of e.g. the Third Reich - note the birthplace of Hitler - but when it comes to the Nordic physical characteristics, the Czechs are more nordic than the Austrians, a fact that has caused the Nazis a lot of headaches. ;-)

    I don't see any substantial differences in fiscal policies and things related to bureaucracy, education etc. between Germany and Austria.

    The R1a marker may say something but if you don't cherry-pick genes and you look at the DNA as a whole, you will see what the DNA analysts have, namely that we're equally close to the French as we are to the Poles. This is a point that may be surprising, but ours being Slavs doesn't mean that we're genetically much closer to other Slavs than e.g. Germanic or Romanic nations.

  4. G'day Lubos,

    There is more to this difference between Austrians and Germans than, perhaps, meets the eye--at first glance. It's cultural and historical. Austrians are not only "eastern Germans". They're also "southern Germans". As such, and because of the geography, they've been linked for centuries to Italy, the Balkans, Hungary, the Adriatic, but also to Czechoslovakia, southern Poland and even western Ukraine. Their Austro-Hungarian empire was a huge multi-ethnic country that was centered not on the notion of Germanness, but around the Habsburg monarchy--another multi-ethnic institution that spread from Warsaw to Madrid in its heyday.

    When Bismarck united Germany, he left Austria out, not without a reason.

    Today, you may find Austrians adding diethylene glycol to wine, raping their daughters, or killing the whole family with an axe--distinctly southern traits, scoffed at in Germany proper...

  5. Dear Gustav, the Austrians are Southeastern Germans. The Prussians are Northeastern Germans. I could also tell you names of the Northwestern Germans and others.

    What's the difference? Everyone has to live somewhere. This tautology doesn't make him more special than others.

    Austria has been a part of the Holy Roman Empire of German nation for nearly a millennium, until a resignation in 1806 when the empire was formally abolished.

    And come on, Bismarck was so nice to leave Austria out because Austrians were different than other Germans? What a load of horseshit.

    Both Prussia and Austria were top candidates to lead the unified Germany (click). Austria just couldn't accept the ethnic key of Bismarck simply because it already controlled a multinational empire so it resisted the incorporation into his new country. But that was due to a differences in the *other* people who lived nearby the Austrians, not due to a difference between Austrians and other Germans.