Euro Crisis: Stand By for Years of Slow, Wretched Decline

by DANIEL HANNAN September 20, 2012

What is a recession supposed to look like? The question is prompted by the number of Britons who, returning copper-tinted from the Algarve or the Mediterranean, remark that Greece/Spain/Portugal seems to be functioning perfectly well.

What exactly were you expecting? Mad-Max-style civilizational breakdown?

In even the deepest crises, normal things take place. As a teenager in the 1930s, Roy Jenkins was stunned to hear a woman mention the delightful holiday her family had enjoyed in Aberystwyth in 1916. A holiday? In 1916? The young Woy had imagined the Great War to be a time of unbroken national emergency. Yet, when the Second World War broke out, he found that civilian life proceeded much as before. He was, he later recalled, more upset at his failure to be elected President of the Oxford Union in 1940 than he had been earlier that day on hearing of the fall of France.

If, leaving Alicante airport, you look for lines of men in cloth caps queuing at soup kitchens - and somehow doing so in grainy black-and-white footage - you'll be disappointed. The next depression won't look like the last one. But don't make the mistake of thinking that, because you got decent service in a tapas bar, all is well.

I recently spent a long weekend with friends in Valladolid, and the signs of a downturn were everywhere. Council services were being cancelled, employees laid off. The handwritten notes that you used to see in every other Spanish shop window in August - ‘closed until September' - have disappeared, because no one can afford to spend three weeks at the beach any more. Bars and restaurants are empty, shopkeepers painfully grateful for your custom. Worst of all, no one sees any way out. Although Spaniards have finally woken up to the idea that the EU is the problem rather than the solution, they are a long way from wanting the peseta back. (I'm doing my best - see clip below - to suggest alternatives to the present policy.)

Because journalists deal in drama, they like to frame the euro crisis as a choice between ‘a solution' and a catastrophic breakdown. But surely there is a third option, namely that people carry on getting gradually poorer.

Imagine that you lost your main source of income tomorrow. At first, not much would change. You'd still be driving the same car, sleeping in the same bed. Only as things broke, and went unreplaced, would your poverty become visible. Dilapidation would steal upon you progressively.

What is true for individuals is true for whole nations - and not just nations in the eurozone. Britain's decision to keep the pound bought us time: the sterling devaluation is the only reason that we have not suffered as Spain and Ireland have. But, unless we make use of that time, we shall simply have deferred the reckoning.

Incremental poverty is not some fanciful prospect. It has already begun. Most of my constituents are less well off than they were last year, and were worse off then than that the year before. The same is true across much of Europe and the United States. Economic contractions have until now tended to be brief. This time, though, the debt burden, the main depressor of growth, is as heavy as ever. What if we face another five or ten years of falling living standards? What if, instead of alleviating the problem, European policymakers exacerbate it with their stimulus programmes, their tax rises, their attacks on financial services and, not least, their determination to keep the euro together?

Decline is precisely that: not a sudden calamity, but a gradual descent; not the end of Atlantis but the end of Atlas Shrugged, a shabby, demoralizing slide into darkness. This is the way the West ends - not with a bang but a whimper.