German chancellor Angela Merkel in Laatzen, Lower Saxony, March 4, 2008 (Sebastian Gerhard)

European leaders on Monday prepared to enact a fiscal pact that will write balanced budget rules into their national laws despite British opposition to such far reaching fiscal integration. “To write into law a Germanic view of how one should run an economy and that essentially makes Keynesianism illegal is not something we would do,” was how one official from the island nation put it.

Britain effectively deserted the Franco-German led push for economic integration in December when Prime Minister David Cameron vetoed a pan-European reform effort. The seventeen nations in the single currency area will move ahead nevertheless. Most other European Union member states, except Great Britain, are expected to join them, if not formally then de facto.

German demands for strict fiscal consolidation have been watered down significantly in anticipation of Monday’s European Council summit. Where the 1997 Stability and Growth Pact demanded that public deficits remained under 3 percent of gross domestic product, drafts for the latest fiscal pact refer to “structural deficits” which may still allow the sort of short term Keynesian stimulus which the British fear will be “illegal.”

There will still be semi-automatic sanctions for profligate governments that only a supermajority of European countries can overturn and fines imposed by the European Court of Justice worth up to 0.1 percent of a nation’s GDPs.

The northern eurozone countries, led by Germany, insist that deficits must be reduced in the short term and the competitiveness of peripheral states improved for the continent to grow out of its debt crisis. There is mounting apprehension in the south about this plan as people there have seen markedly little progress in recent months.

In Greece and Spain, nearly one out of five workers is unemployed. The jobless rate in Italy and Portugal hovers near or above 10 percent.

Italy, where Prime Minister Mario Monti and his cabinet of technocrats are rushing through reforms to rein in public spending and liberalize the economy, has seen its borrowing costs fall but Greece, Portugal and Spain remain mired in recession with dismal growth forecasts for 2012.

Greece is expected to reach an agreement with banks and investors about reducing its debt obligations this week. Its bailout financing from other European countries could be in peril however if there isn’t a more convincing effort to balance the budget and modernize the economy.

Portugal’s slide toward becoming the next Greece has gathered pace as banks recently raised the cost of insuring government bonds against default. The conservative administration, in power there since last summer, has been enacting cuts and reforms to balance the budget but like other eurozone countries, including France, it is relying mostly on tax hikes to reduce the shortfall in the short term.

If there isn’t more robust growth in Portugal this year, the country could need a second bailout to avoid bankruptcy.

In Spain, where conservatives have also recently taken power, growth is lackluster and unlikely to meet the 2.3 percent target this year. That raises the question whether Madrid will manage to cut its deficit from around 8 percent of economic output last year to 4.4 percent by the end of 2012 as promised.

The Germans, meanwhile, are still reluctant to pour more money into the European rescue fund which many analysts and southern European governments believe will calm markets.

In Davos, Switzerland last week, Chancellor Angela Merkel pointed out that despite last year’s expansion of the European Financial Stability Facility, which now has an effective lending capacity of €440 billion, there is pressure to expand it again. “Now they say it should be twice as big,” she lamented.

Some say, “it should even be three times as big, then we’d really believe you.” And I always ask myself how long is that credible and when is that no longer credible?

What Germany doesn’t want, she added, “is a situation in which we promise something we can’t back up in the end.”

Prime Minister Lucas Papademos of Greece addresses parliament, November 14, 2011

Greek debt talks are reportedly at an impasse just as the troubled European nation’s fiscal predicament tightens. Even if private bondholders are willing to accept a 50 percent “haircut” on their investments, Greece’s debt will likely increase by €20 billion more than was previously anticipated this year.

The Greek economy, which shrank about 6 percent last year, is projected to shrink another 4 percent by the Credit Suisse and Goldman Sachs investment banks which is worse than the International Monetary Fund forecast in November.

With the rating of Europe’s temporary bailout fund in jeopardy because of Standard & Poor’s downgrades of Austria’s and France’s creditworthiness last week, a refinancing of Greece’s debt obligations may prove difficult in the short term. There isn’t the political will in the few euro countries that maintain their treasured AAA ratings—Finland, Germany, Luxembourg and the Netherlands—to loan billions more to insolvent nations in the periphery of the single currency zone.

European leaders agreed to a second Greek bailout package last year worth €130 billion. A chunk of that money may need to be spent soon if Greece is to recapitalize its banks and persuade private bondholders to accept a restructuring.

Investors are asked to swap more than €200 billion of Greek bonds for new paper nominally worth half that value. In order to “sweeten” the deal, Athens would need to borrow some €30 billion from its dedicated bailout fund but northern politicians are reluctant to write it such a check. Given that the Greek Government has failed to deliver on austerity promises repeatedly in recent years, leaders elsewhere fear that they’ll undermine the incentive to implement necessary budget reforms if they don’t make life difficult for their Hellenic counterparts.

There will also be elections in Greece soon, probably in April, which the opposition conservative party are expected to win. Antonis Samaras, if he becomes prime minister, may seek to renegotiate his country’s financial pacts with the other eurozone governments as well as with private bondholders. His New Democracy party has signed onto the terms of the most recent bailout package but previously rallied against austerity measured introduced by George Papandreou’s socialist administration.

European and IMF inspectors have seen very little progress in terms of fiscal consolidation. Public spending has been cut substantially but tax revenue has simultaneously decreased. The government’s shortfall didn’t much improve between 2010 and last year. In both years, the deficit exceeded 10 percent of gross domestic product.

Structural entitlement and labor market reforms remain politically sensitive as people have seen their paychecks and pensions cut without the government offering any prospects for growth. A comprehensive privatization effort has yet to be initiated. Business confidence is fading while nearly one out of five Greek workers is unemployed.

Prime Ministers Silvio Berlusconi of Italy and George Papandreou of Greece during a European Council meeting in Brussels, June 17, 2010

The Greek and Italian prime ministers were both under heavy pressure to resign on Thursday. The focus of Europe’s sovereign debt crisis has shifted to their countries with the perception lingering that they won’t be able to rein in public spending sufficiently in the short term to stave off a default.

After eurozone leaders agreed to expand the temporary European bailout fund at a summit last week and forgive 50 percent of Greek debt, Prime Minister George Papandreou called for a referendum on the rescue package to the dismay of other euro nations.

German chancellor Angela Merkel and French president Nicolas Sarkozy tried to convince Papandreou to scrap plans for a vote ahead of a G20 meeting in Cannes. Lawmakers in Athens made similar demands where there was speculation that Papandreou might resign.

The Greek finance minister, Evangelos Venizelos, notably broke ranks with Papandreou after convening with the French and German leaders who reportedly threatened that the country wouldn’t receive any European financial assistance before it agreed to the terms of last week’s accord.

Greece’s ruling socialist party is deeply unpopular as is the latest €130 billion bailout package yet a majority of Greeks want their country to remain part of the European currency union. The outcome of a referendum, therefore, is far from certain.

In Rome, half a dozen parliamentarians called on Prime Minister Silvio Berlusconi to quit as his unruly coalition has proven unable to implement the sort of austerity measures that are deemed necessary for Italy to regain fiscal balance.

Berlusconi’s political friends in the separatist Lega Nord publicly opposed far reaching pension reforms that had been recommended by Italy’s European partners at the October summit. They previously blocked €4 billion in cuts to local governments that were part of an austerity package designed to rein in the pervasive Italian state.

The besieged Italian prime minister, who faces corruption charges and turmoil in his own conservative party, failed to win support at a cabinet meeting late Wednesday for a comprehensive reform effort that he had planned to take to the G20 meeting in the south of France. He did promise the other leaders in Cannes to call a confidence vote within two weeks on new measures to fight the economic calamity. Berlusconi barely survived a confidence vote in December when loyalists outnumbered the opposition by just three votes.

With Greece teetering on the brink of possibly leaving the euro, the future the single currency could depend on preventing a meltdown in Italy which threatens to overwhelm the bloc’s existing defense mechanisms. Italy’s public debt is equal to 120 percent of gross domestic product. Its $1.8 trillion economy is probably too big to bail out unless the European Central Bank would continue to finance Italian deficit spending for months if not years to come.

(21:42 GMT) Papandreou has scuttled plans for a referendum and agreed to form a caretaker government with the conservative opposition that will implement the austerity measures that are demanded by the latest European bailout agreement and schedule parliamentary elections. The prime minister’s immediate future is still in doubt as both conservatives and members of his own cabinet demand his resignation. A confidence vote will happen on Friday.

Prime Minister George Papandreou of Greece, August 31

Greece will hold a referendum about the newest European aid package, Prime Minister George Papandreou announced on Monday. “We trust citizens, we believe in their judgment, we believe in their decision,” he told ruling socialist party lawmakers.

Nearly 60 percent of Greeks view Thursday’s €130 billion bailout agreement as “negative” or “probably negative,” according to a survey released on Saturday.

At a summit last week, European heads of government agreed to continue financial support for Greece and forgive 50 percent of the nation’s debt. The second bailout package comes after the €110 billion committed last year proved insufficient to steer the troubled country off the brink of bankruptcy.

With more than €340 billion in debt, Greece is among the least creditworthy of nations. Nearly one out of ten Greek workers is unemployed and its economy is expected to contract by as much as 5 percent this year. The lack of expansion, caused by a dramatic drop in consumer spending, is accompanied by higher taxes which are extremely detrimental to private sector growth.

Many Greeks blame their government and other euro nations for imposing heavy austerity measures on them. The specter of default does not appear to have engendered a particular willingness on the part of the Greek people to reform. Reining in the pervasive Greek state is unpopular as is international “support” which a majority of Greeks perceive as punishment.

The outcome of a popular vote on the latest rescue package is far from certain however. 72 percent of Greeks want to stay in the currency union. If a rejection of the second bailout agreement could imply a eurozone exit, a majority may be willing to bear the burden of further budget cuts.

If Greece were unable to repay all of its loans despite the attempted rescue, it would probably not renege on its obligations to other members of the euro area, thus forcing private bondholders to accept even bigger losses. Investors could then fear similar partial defaults for other heavily indebted European countries as Italy, Portugal and Spain and drive up their borrowing costs, forcing their government to tap into the temporary bailout facility which might not be big enough to finance Italian and Spanish deficit spending for a prolonged period.

Christine Lagarde, managing director of the International Monetary Fund, talks with Wolfgang Schäuble, the German finance minister, in Washington DC, April 15, 2011

As Greece’s debt is increasingly likely to be restructured, European leaders convene this weekend to discuss a plan to prevent banks that would suffer major losses because of it from going bankrupt. A coordinated recapitalization effort, as championed by the International Monetary Fund and the United States, seems unacceptable to creditworthy nations like Germany however.

American officials and the IMF urge European countries to inject public capital into the financial industry to quickly restore confidence in the euro area. The European Central Bank, which has reluctantly financed Italian and Spanish borrowing in recent months to prevent the debt crisis from reaching those countries, would guarantee government debt under their plan.

European leaders are divided on a mass bailout effort for financial institutions however and would rather ask banks to raise capital from private sources in anticipation of a Greek default. They could appeal to their national governments for support and to the European Financial Stability Facility as a last resort if their exposure to Greek sovereign bonds becomes untenable.

Economists at the Brussels think tank Bruegel estimated last year that just 20 percent of Greek debt was held by domestic banks. Another third is held by pension funds and insurance companies in other European countries.

The step by step approach is a concession to fiscally solvent euro nations including Finland, Germany and the Netherlands which were wary of expanding the EFSF to begin with to enable it to bail out banks.

German finance minister Wolfgang Schäuble told fellow christian democrats in Berlin last week that the Greek debt burden “will simply have to be reduced to such an extent as to provide Greece with a reasonable outlook.” But this cannot come exclusively at the expense of taxpayers, he added.

The eurozone’s leaders agreed to another Greek bailout in July after the €110 billion committed last year proved insufficient to steer the troubled country off the brink of bankruptcy.

Last month, it emerged that Greece had failed to miss the deficit target that it had set to qualify for the sixth, €8 billion tranche of the original aid package it needs to be able to pay public sector salaries.

With more than €340 billion in debt, Greece is now among the least creditworthy of nations. Nearly one out of ten Greek workers is unemployed and its economy is expected to contract by as much as 5 percent this year. The lack of expansion, caused by a dramatic drop in consumer spending, is accompanied by higher taxes which are extremely detrimental to private sector growth.

The specter of default does not appear to have engendered a particular willingness on the part of the Greek people to reform. Although subject to heavy austerity measures, including public sector pay cuts and pension reductions, reining in the pervasive Greek state is unpopular.

Government spending accounts for almost half of the Greek economy and the state maintains ownership in airports, casinos, hotels, resorts, railways and utilities. Many of these enterprises are wholly unprofitable and need thorough reforms before they can go to market.

The agency charged with selling off state property employs less than a dozen people while local governments possess no digitalized records of what buildings and land they own.

Greece’s powerful trade unions are another obstacle as they are vehemently opposed to the planned liberalization effort to be carried out by a socialist administration. Athens has promised to net €50 billion through privatizations but consistently falls short of its short term financial targets.

Contrary to the original aid program, the second bailout involved voluntary contributions from banks and insurance companies that had invested in Greek bonds. They were persuaded to accept rollovers on Greek debt which should buy Athens time to get its fiscal house in order.

If Greece were unable to repay all of its loans despite the attempted rescue, it would probably not renege on its obligations to other members of the euro area, thus forcing private bondholders to accept even bigger losses. Investors fear similar partial defaults could happen in countries as Italy, Portugal and Spain which are also heavily indebted and struggling to reduce their deficits.

European Commission President José Barroso speaks with Greek Prime Minister George Papandreou during a summit in Brussels, March 11

European governments have mere weeks to decide whether to let Greece default or commit to a long term financial rescue operation of the country. If their parliaments enact a second, €109 billion bailout for Greece this month, which includes billions worth of contributions from the private sector, they cannot afford to backpedal on the pact anymore without undermining confidence in financial markets.

The eurozone’s political leaders agreed to another Greek bailout in July after the €110 billion committed last year proved insufficient to steer the troubled country off the brink of bankruptcy.

With more than €340 billion in debt, Greece is now among the least creditworthy of nations. Nearly one out of ten Greek workers is unemployed and its economy is expected to contract by up to 5 percent this year.

The specter of default does not appear to have engendered a particular willingness on the part of the Greek people to reform. Although subject to heavy austerity measures, including public sector pay cuts and pension reductions, reining in the pervasive Greek state is unpopular.

Government spending accounts for almost half of the Greek economy and the state maintains ownership in airports, casinos, hotels, resorts, railways and utilities. Many of these enterprises are wholly unprofitable and need thorough reforms before they can go to market.

Greece’s powerful trade unions are another obstacle as they oppose a planned liberalization effort. Athens has promised to net €50 billion through privatizations but consistently falls short of its short term financial targets. Just last week, representatives of the European Commission, the European Central Bank and the International Monetary Fund suspended their evaluation of Greece’s austerity program in anticipation of revised budget plans. The last of six multibillion euro aid tranches hinges on their approval. Without the necessary consent, Greece would soon lack the funds needed to service its existing debt obligations.

Contrary to the original aid program, the second bailout is supposed to involve banks and insurance companies that have invested in Greek bonds. They would be persuaded to accept rollovers on Greek debt which could buy Athens time to get its fiscal house in order.

If the new plan is approved by national parliaments this month, roughly two thirds of Greek debt would ultimately be owed to other European countries and the IMF. If Greece were unable to repay all of its loans despite the attempted rescue—considering the slow pace of reform, that is a real possibility—it would probably not renege on its obligations to other members of the euro area, thus forcing private bondholders to accept huge losses. Banks and pension funds across Europe might be better off if there were a selective default now.

There is opposition among nationalist and conservative parties in Austria, Finland, the Netherlands and Slovakia to continuing to pour money into Athens’ coffers. The Slovaks actually voted against the first bailout after they joined the euro in January 2009.

As the malaise in Greece continues, there is talk of simply kicking it out of the eurozone. A Greek exit from the currency union would imply major losses for bondholders however and probably not alleviate its debt burden. Nor would Greece be capable of regaining competitiveness and growth without enacting the very reforms on which its international support is conditioned. A new drachma could boost exports in the short term but superfluous regulations and red tape do far more to impede foreign investment and trade than the value of the euro ever has.

A revived national currency would tempt policy makers in Athens to inflate their way out of debt moreover. With or without the euro, bondholders will suffer losses unless European governments are willing to bear the burden of financing Greek deficit spending for years to come.

Presidents Nicolas Sarkozy of France and Herman Van Rompuy of the European Council in Brussels, June 24

The last two weeks have proven interesting for people who follow the unfolding situation in Europe for two separate events.

On July 15, the European Banking Authority released reports on the health of the European banking system. These “stress tests” measured the stability of banks by evaluating their ability to hold a minimum amount of core capital when set against economic situations similar to a prolonged recession. Another function for these tests was to establish which banks were exposed to Greek sovereign debt and thus enhance trust among financial institutions, as banks are wary of lending to each other if the extent of exposure is unknown.

On July 21, eurozone leaders came together and agreed on far reaching measures that were the most convincing for rescuing Greece to date.

Although these two events have provided transparency, time and confidence, a number of issues remain unresolved. Indeed, the reason that a relatively weak compromise on averting bankruptcy for Greece could be met with great relief in financial markets may be a lack of clear political direction within the singly currency area. There are crucial questions still unanswered and there is real risk that the framework may be the seed of an unfavorable outcome.

The larger outlines of the deal are well known by now. Greece has been alleviated of the burden of relying on the market for funds for a considerable time. This was achieved by a combination of support from the European Union and the International Monetary Fund and a voluntary, private sector rollover and debt swap.

After much controversy, private sector involvement was introduced partly to make the resolution feasible in Germany to continue providing funds for Greece. Although this solution entails writing off a share of the original value due to investors, for the time being it effectively removes the fear of a disorderly default that would lead to contagion. Fear of a “Lehman Brothers” moment has disappeared for banks exposed to Greek debt.

Important was also the lowering of the interest rate of Greece’s debt to 3.5 percent which will apply to Ireland and Portugal as well, in the hopes that this relief can keep them safe from further intervention. Lastly, the summit saw a widening of the powers of the European Financial Stability Facility, a financial vehicle that was granted the power to intervene if a country in the eurozone is under financial duress. This “European IMF” may prove to avert the dangers of a self fulfilling crisis for the countries that are still deemed to be at risk.

Positive news as this is, the foundation which this solution relies upon is fragile. Although Greece will have funds at its disposal for the time being, it does little to increase the competitiveness of the Greek economy. Even with the latest package, debt to GDP ratios will still be higher than those of Italy at 120 percent. If Greece’s economy is not reformed in the coming years, it could need another bailout in the future.

A worry with wider implications is found in the words of the summit’s communiqué (PDF) which states that,

As far as our general approach to private sector involvement in the euro area is concerned, we would like to make it clear that Greece requires an exceptional and unique solution.

All other euro countries solemnly reaffirm their inflexible determination to honor fully their own individual sovereign signature and all their commitments to sustainable fiscal conditions and structural reforms…

This is currently the only guarantee that private investor debt in countries with similar problems will not face a similar write off as was the case with Greece.

For the market this will create uncertainty as the promise comes from the same leaders whose credibility is in shatters. What market uncertainty implies is hard to say at present yet when Moody’s recently further downgraded Spanish sovereign debt, it cited the possibility of future private sector involvement as one of the main concerns. Also worrying is that since Greece’s write off will be voluntary, it does not trigger credit default swaps. The trigger may have the effect of raising borrowing costs for other highly indebted economies as investors shift to the CDSs of their debt, thus leading to higher volatility in debt spreads and increased market jitters.

What emerges from the past weeks is that no scenario is impossible. Although many important steps were taken in bringing clarity to the situation, we have yet to see the final outcome. Many saw these resolutions as a step toward further integration of the eurozone however it is unclear how strong the popular mandate is for such a development. The short term outcome will likely entail more last minute compromises, high stress put forth by the markets and a new financing plan for Greece. The depth of last week’s political efforts does offer some optimism for a more coherent path forward.

With Italy and Spain on the verge of being drawn into the whirlpool of Europe’s sovereign debt crises this month, government leaders finally enacted a host of measures which they had previously dismissed as unthinkable. Interest rates on the bailout loans to Greece, Ireland and Portugal were cut substantially while their maturity was doubled; these funds were allowed to buy back bonds while eurozone members agreed to help authorities shore up bank capital with additional financing.

Some €20 billion will probably be set aside to buy back up to €32 billion of Greek bonds at just over 61 cents on the euro. Investors would thus be forced to contribute some €12.6 billion to the operation.

Eurozone officials had been contemplating private sector involvement in the next round of financial aid for Greece in order to win political support from euroskeptic nations like the Netherlands and Slovakia as well as Germany which is the single largest contributor to a multibillion euro stabilization fund that also lends to Ireland and Portugal.

Although the Europeans deny it, the trim in debt payments amounts to a partial default and will likely be treated as such by credit rating agencies. The European Central Bank long argued against any policy that could bring about a Greek default but its president, Jean-Claude Trichet, won assurances of “credit enhancement” from the political leadership which should allow Greek banks to continue to get financing worth abound €100 billion from Frankfurt.

The International Monetary Fund, which is also involved in Athens’ financial rescue operation, applauded the eurozone countries for continuing “to provide support to countries under programmes until they have regained market access.” These “programmes” involve mass spending cuts that largely affect public sector workers in Greece but simultaneously dampen private sector growth forecasts due to an inevitable decline in consumer demand and expected tax hikes.

Perhaps the largest reform effort initiated this week was the expansion of the European Financial Stability Facility which will now be more flexible to react with short term lines of credit when a financial crisis happens in the eurozone. Germany and the Netherlands previously blocked such changes, fearing permanent bailouts. Their national parliaments will have to approve the changes before they can come into effect. Slovakia reportedly warned on Thursday that its legislature might not vote in favor of a more flexible stability fund. It previously refused to help bail out Greece.

French President Nicolas Sarkozy nevertheless hailed the agreements as big step toward the creation of a “European Monetary Fund” and “economic government” throughout the eurozone. He relished the notion of exacerbating tension between European Union states that are in the single currency bloc and those that aren’t. Poland, especially, has been frustrated but as Sarkozy pointed out, striking a deal with twenty-seven instead of seventeen leaders would have been nigh impossible yesterday.

The single currency bloc is urgently attempting to secure enough financing for Athens for the next three years and put and end to market concern about the sustainability of public debt in other southern European economies, including Italy and Spain.

The first option, as reported by Reuters, would involve buying back Greek debt which could trigger further credit downgrades if not default. Under this scenario, the country would replace existing debt obligations with new bonds in a swap operation backed by more creditworthy European partners.

The second option is based on a French proposal for a debt rollover which would probably also cause a selective default.

The third and only option to avert bankruptcy would be to impose a tax on the financial sector or convince Greek banks to maintain their currently high levels of exposure. This would be the cheapest option for European governments but riskiest for private lenders.

The Greek state is more than €340 billion in debt. With a population of over eleven million, that amounts to some €30,000 per person or 150 percent of annual economic output. €110 billion worth of financial aid from fellow European nations and the International Monetary Fund last year has proven insufficient so a second package worth up to €120 billion is under discussion.

If Greece defaults, it could prompt more bailouts—for Greece, presumably from the International Monetary Fund, because it would be cut off from financial markets but also for European, particularly German banks that have invested billions in Greek bonds.

For years, Greek taxi drivers have had to buy special permits to do their work. The permits were expensive, acquiring one was a bureaucratic nightmare and usually, taxi drivers had to chip in a bit of cash to persuade the government official on the other side of the desk to consider their request.

As Greece is forced to cut back on public spending and privatizing parts of its hugely inefficient economy, the taxi permits are on their way out. Naturally, taxi drivers who, sometimes even after many years of work, haven’t recouped their investment yet, are furious. They’ll have to swallow a loss and learn to make a living in a competitive market all of a sudden.

Washington DC cab drivers are used to operating in a fairly competitive market. Although they have to be licensed too, the process isn’t burdensome. Not yet anyway for the district is considering legislation that would require every taxi driver in town to buy a special permit called a “medallion.” The total number of medallions would be capped at roughly four thousand. Estimates are that between six and ten thousand taxis are currently operating in the city.

Proponents of the measure claim that there are too many taxis in Washington. If that’s the case, every economist will tell you that it’s only a matter of time before their number declines. If taxi drivers can’t make a living in DC, they’ll move or seek a different profession. Some taxi drivers don’t want to wait for that to happen though and are lobbying for the medallion system.

It gets worse. The first set of medallions would be offered for sale to drivers who have worked and lived in Washington for at least five years, thus discriminating against young and innovative entrepreneurs who make the market dynamic. The city admits that it has no idea how many taxi drivers would initially qualify.

New York City has a similar medallion system. Last year, medaillions traded for up to $620,000 a piece there. Not surprisingly, there aren’t many private cab drivers left in New York. Rather the market is dominated by investment companies who lease medallions to individual taxi drivers, driving up the cost for the customer because now two people have to profit off him.

Just ask the Greeks how that worked out.