The February 10, 2010, broadcast of NPR’s On Point with Tom Ashbrook, Europe’s Debt, Global Crisis?, analyzes the growing debt crisis of the five PIIGS of the European Union – Portugal, Ireland, Italy, Greece, and Spain. Little Greece has the worst credibility problem. The reason why this matters is due to fears that Greece could default on its sovereign debt. That fear has spread to other struggling countries in the European Union (EU). Investors question whether Greece will be able to refinance large amounts of debt that come due this year and if so, at what price. If Greece defaults on its debt, investors may balk at the prospect of buying up debt of the other little PIIGS, thus slowing down or even reversing the global economic recovery.
Surely the EU will intervene to avoid another global financial crisis that might even precipitate a worldwide depression, right? Not necessarily. Unlike sovereign nations like the United States, Germany, and Japan, The EU does not have a central bank or a Federal Reserve. The EU would have to go hat in hand to countries like Germany and have their central bank agree to a bailout for, say, Greece. It is an open question whether Germany would do so, let alone face the German taxpayer for the higher interest rates that would inevitably result. If the EU cannot resolve the debt crisis of the five little PIIGS, the entire experiment in economic unity that is the EU may come to an abrupt end. And if the EU disintegrates along with the Euro, a worldwide financial meltdown would ensue.
Ashbrook and his guests described the problem well enough, but failed to identify the cause – economic socialism. The PIIGS acronym is apt because it succintly describes both the nature and the cause of the economic problems facing Portugal, Italy, Ireland, Greece, and Spain. One of Ashbrook’s guests actually blamed the blatantly obvious failure of the socialist economic model on “financial capitalism.” Another guest blamed unscrupulous investors and creditors. Another blamed many of the citizenry who are in debt up to their eyeballs. None of Ashbrook’s guests even mentioned the word “socialism.”
But if the worst happens, and the collapse of the EU follows the default of the sovereign debt of one or more of the five little PIIGS, it won’t be due to an overabundance of Capitalism. The root cause will be economic socialism itself. This should serve as a warning to all those who favor big government solutions (e.g., Obama, Reid, Pelosi, and most of the Democrat majority in Congress) to to all the world’s ills, but it probably won’t. After all, it can’t happen here, right?