There have been high level Euro rescue talks going on all weekend. How are they faring? Not well.
Just when the eurozone governments thought it could not get worse for Europe’s single currency, it did.
Shell-shocked EU finance ministers meeting in Brussels on Saturday were already reeling from the worst Franco-German rift for over 20 years and a fractious failure to resolve the problems that have brought Greece, and the euro, close to the brink.
But then a new bombshell hit as a joint report by the EU and the International Monetary Fund (IMF) warned that, without a default, the Greek debt crisis alone could swallow the EuroZone’s entire €440 billion bailout fund – leaving nothing to spare to help the affected banks of Italy, Spain or France.
Of course, the problem with following this story from abroad is how the news of the summit gets distorted like some intercontinental game of telephone, especially when filtered through the dulcet-toned hearing aids of welfare state boosters. Thus this overly enthusiastic piece in left-wing newspaper The Guardian, citing that a deal was near based on unnamed “EU diplomats” becomes this blipvert in the left-wing Daily Beast stating that a deal had been reached, becomes this Fark thread in which clueless liberals crow that no one should ever have doubted the soundness of either the Euro or the glorious European welfare state. And also that ratings agencies are evil.
And yet, as of right now, this “done deal” to rescue the Euro has yet to materialize. How strange!
Somehow, how France (a country running a a $90+ billion dollar budget deficit) and Germany (a country whose ruling party has lost every local election since it started shoveling money down the Greek bailout chute), were to magically comes up with some €1.6 trillion Euros (the difference between the current bailout fund and the super-sized fund required to backstop the Euro following the inevitable Greek default) is nowhere specified. After all, it was hard enough for Chancellor Angela Merkel to get Germany’s contribution to the fund boosted from €123 billion to €211 billion in the first place.
As a result of all this happy, confident talk of how the Euro will never be allowed to falter? Moody’s downgraded Spain’s credit rating. They also threatened to do the same for France, especially if they decided to throw more taxpayer money into the Greek debt maw.
The Good Ship Europe bears its load of bailout guarantees straight for the center of the Greek Debt crisis.
And if you’re the EU, how do you prevent your debt from being downgraded? A.) Stop borrowing so much, B.) Increase your emergency reserves, or C.) Make it illegal for bond rating companies to downgrade your debt?
Yeah, that will work.
How badly awry has the Eruo project gone? The problem with this Hoover Institute piece on is what not to quote from it:
The champions of the European Union once touted it as a “bold new experiment in living” and “the best hope in an insecure age.” But these days “fear is coursing through the corridors of Brussels,” as the B.B.C. reported in September. Such fear is justified, for the nations of Europe are struggling with fiscal problems that challenge the integrity of the whole E.U.-topian ideal. Greece teetering on the brink of default on its debts, E.U. nations squabbling about how to deal with the crisis, debt levels approaching 100 percent of GDP even in economic-powerhouse countries like Germany and France, and European banks exposed to depreciating government bonds are some of the signposts on the road to decline.
A monetary union comprising independent states, each with its own peculiar economic and political interests, histories, cultural norms, laws, and fiscal systems, was bound to end up in the current crisis. All that borrowed money, however, was necessary for funding the lavish social welfare entitlements and employment benefits that once impressed champions of the “European Dream.” Yet, despite the greater fiscal integration created by the E.U., sluggish, over-regulated, over-taxed economies could not generate enough money to pay for such amenities. Now, the president of the European Council, Herman Van Rompuy, admits, “We can’t finance our social model.”
This financial crisis means the government-financed dolce vita lifestyle once brandished as a reproach to work-obsessed America is facing cutbacks and austerity programs immensely unpopular among Europeans otherwise used to amenities like France’s 35-hour work week, or Greece’s two extra months of pay, or England’s generous housing subsidies that cost $34.4 billion a year. No surprise, then, that from Athens’ Syntagma Square to Madrid’s Puerta del Sol, austerity measures attempting to scale back government spending have been met with strikes, demonstrations, boycotts, and protests, some violent, on the part of citizens for whom such government entitlements have become human rights. In fact, such transfers of wealth have been formalized as rights in Articles 34 and 35 of the E.U.’s Charter of Fundamental Human Rights.
The Euro crises will likely lead to another recession in the U.S. That is, if you think we ever came out of the Obama recession in the first place, which we didn’t.
Europe’s private sector shrank for the first time in two years last month.
Again: The question of a Eurozone collapse is not “if,” it is “when.” And how much of the losses European banks can put taxpayers on the hook for.
Tags: Angela Merkel, Euro, Europe, European Debt Crisis, France, Germany, Greece, Spain, Welfare State
Come on, it’s not that bad. All you say is true, but the leaders of the big EU countries are sophisticated diplomats. They will be able to work this all out in a civilized manner (and perhaps show us Americans how it is done.)
My husband still thinks that survival of the EU and Euro is above theoretical, if only just. I do not share his optimistic appraisal of the situation.