The European Union Financial Crisis

The European Union has been going through a major test of its viability with the Greek debt crisis. At stake is the viability of the entire EU project as it presently exists. Without a full economic union it has become clear that there is no true "union," and without a unified fiscal policy controlled by a central authority the present debt problems of the member states will inevitably continue.

Germany is by far the strongest economy within Europe. Its fiscal stability has been the guarantee behind the financial firewall that is keeping the fragile EU together. No other EU member state can begin to take on this role—and that is the unspoken problem and fear. No one desires to see the present German economic dominance to advance to another stage of control.

The crisis in Europe is still simmering. Greece has received a series of bailouts, not without pain. Spain, Italy and Austria have received credit downgrades. Democratically elected leaders have been replaced in some countries. German Chancellor Angela Merkel is being accused of leading Germany and Europe down the wrong path. What can be done?

Germany is the leading manager of this crisis, and in truth is the one country that is responsible for the current situation. Germany pushed hard for the single currency but, like all other EU members, did not want to give up sovereignty to another authority. The result was a single currency, the euro, without effective political union.

What some predicted more than 10 years ago has now come to pass—a massive debt crisis with no effective way to manage and remove it. One observer describes it as "a machine from hell." Many see a need for political union, but at the same time it's the most feared of solutions.

The Financial Times of London puts it this way: "The current crisis shows that Greeks, Germans and Italians do have one important thing in common—a deep aversion to ceding control of their national budgets. The result is that the euro is in a dangerous and unstable position. The actions that are being urged on Germany are unreasonable. But Germany's own solution—structural reform now, political union later—is unworkable" (Gideon Rachman, "Germany Faces a Machine From Hell,"  Feb. 14, 2012).

The fear of a strong Germany controlling the future of Greece or any insolvent European country immediately evokes words like "Auschwitz" or "Nazism." Behind the scenes, leaders are very worried about the outcome. The crisis simmers, waiting for a bold solution from somewhere.

As things stand, Germany is seemingly the only nation that can steer Europe back into calm and stable waters. Watch for some further crisis to appear and create the right conditions for a group of core nations to cede political and operational control to a power that can right the ship. It will come, and when it does it will reshape Europe and possibly the world scene.

An excerpt from Good News Magazine, May - June edition


Essentially, when the EU was formed, countries that already showed a propensity to spend more than they brought in (sounds familiar, something like what would happen to Canada if the NDP ever got into power as they know NOTHING, or are REALISTIC about real world economics. Sorry, I got carried away.) Spain, Italy, Portugal, Greece and other countries had, at the time, were paying 14% on their loans. So, when they were given the opportunity to become part of the European Union, their interest rate dropped to 4%. Countries jumped at this, BUT, continued their undisciplined spending ways.

Now, the citizens are upset with austerity, which really is what is THE solution to the problem. Greece and France have voted in Socialist governments with the promise of a better, more prosperous way of life. The problem is, the day after the euphoria of electing a new gov't the financial problems still exist and reality sets in (again). These new gov'ts can't do for their citizen's as promised and the treadmill continues, except now, they have a larger debt to pay due to the costs from the election.

The public are looking for a boost in their respective economies and they foolishly think that by changing the gov't, that will, overnight, create enough optimism that new business'es will open and prosperity will come a knockin' for all.   Ignorance of this dire economic situation, is bliss for all. It is very obvious that the economy of many of these affected, will have to get worse before they "get a grip" and reverse their misguided practise of grabbing the bull by the tail and instituting some real austerity measures. Unfortunately, the public will be severely and very negatively affected. Canada is not protected as our exports to Europe will experience a drop in demand, causing a rise in unemployment, especially in provinces that can least afford it.