That EU financial crisis – is it about sovereign debts owed by individual countries, or the credibility of banks elsewhere which prop up that debt? – rumbles on.

Take Greece:

Greece is undergoing what amounts to an IMF austerity package but without the IMF cure of debt restructuring or devaluation that usual for a country with a spiralling public debt and a chronic loss of competitiveness.

The IMF says Greece’s debt will rise to 150pc by 2013-2014 even if Athens complies fully, a strategy viewed as self-defeating by several ex-IMF officials. There is a strong suspicion that the real objective is to bail-out North European banks with heavy exposure to Southern Europe, rather help Greece.

Of course. What do the Greeks expect?

“This tragedy does not have a solution,” said Hans-Werner Sinn, head of the prestigious IFO Institute in Munich.

“The policy of forced ‘internal devaluation’, deflation, and depression could risk driving Greece to the edge of a civil war. It is impossible to cut wages and prices by 30pc without major riots,” he said, speaking at the elite European House Ambrosetti forum at Lake Como.

A striking idea. Civil war! In Greece!

But who would be fighting whom, and about what? And who would win?

In all societies there are those who pay more into the public pot than they get back, and those who get far more from the public pot than they pay in.

The rationale for this is never really articulated. There are a number of different and sometimes overlapping arguments:

  • Redistribution:  those who have More ‘should’ a priori help those who have Less (and, yes, that must done through state-sponsored seizure of assets from the More for transmission to the Less – pay taxes or go to prison!)
  • Utilitarianism:  regardless of considerations of resdistributive equity, everyone (‘society’) will tend to be better off if those with More give to those with Less. So cough up!
  • Paternalism:  those of us with More will be more likely to keep a good part of their assets if they pass some assets to those with Less, to stop the mob wrecking everything. So cough up!
  • Tradition:  that’s how it’s always been, isn’t it?

Governments typically duck their responsibility to explain these issues in simple terms to the public and to give a clear explanation of the core assumptions of public life, preferring blithely to borrow on an impossible scale against the hope that in years to come ‘growth’ will make it possible to pay back those debts.

The EU allows this national irresponsibility to pass to an even higher elite, impenetrable level – what if France (or Germany, or Holland?) is manoeuvring amidst all these problems to save its own banks at the expense of other countries’ financial credibility and those other countries’ taxpayers’ savings?

The political crisis comes when things get tight and those with Less start to think that they are entitled to be supported by those with More. And if the law starts to enforce that entitlement, those with More are reduced to the status of slaves working at the behest of those with Less.

If in these circumstances those with More start to resist paying out (actually stop paying out and/or transfer their assets out of the jurisdiction) those with Less have only two choices if they are not prepared to settle for what they have:

  • to attack those with More and try to force them to pay more – a strategy doomed to be short-lived
  • to change their ways and try to persuade those with More to pay more as part of a new deal – not easy after those with More have been milked for too long?

In Greece’s case, it is easy enough to identify lots of people who in one way or the other have avoided paying taxes. My Greek friends tell me that most of the population are implicated in that.

Insofar as there is an obviously wealthy elite with More, it makes little objective sense for more numerous civil warriors with Less to attack them – any resources thereby seized will make little difference to the overall problem, and the willingness of those with More to invest in Greece will plummet.

So the civil warriors will have to look for fatter targets, ie the rest of the EU.

But the rest of the EU luckily does not live in Greece, even if all sorts of EU companies have offices there which might burn brightly for an hour or two.

Hence my bafflement. What would a Greek civil war in fact be about?

Maybe it would boil down to a struggle between two ideas:

  • that democracy has limits – that it is illegitimate for the majority to defy financial and moral gravity and run up insane collective debts through government incompetence, expecting some or other foreigners to pay them off
  • that democracy has no limits: the majority (normally by definition with a large bloc of those with Less) can do what it likes, regardless of common sense or any long-term consequences

Sounds a bit like the next US elections to me.