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The Euro Crisis and the Decline of Europe
Posted By Joseph Puder On February 24, 2012 @ 12:07 am In Daily Mailer,FrontPage | 11 Comments
Reuters news service reported on February 14, 2012 that the “rating agency Moody’s warned it may cut the Triple A rating of France, Britain, and Austria, and it downgraded six other European nations including Italy, Spain, and Portugal citing growing risks from European debt crisis.”
What appeared in 2008 as imminent European political integration is now in a state of disarray. What seemed inconceivable just four-years ago – the idea that the European Union (EU) would devolve back into nation-states in part or as a whole — is now being seriously considered. Greece, a member state of the EU and a member of the euro-zone, is now a candidate for ejection.
Decades of cradle-to-grave socialism, a short work week and long vacation periods for European Union workers have taken a toll on the treasuries of the nation states. The good life lived in Europe without a thought of tomorrow has brought on these days of reckoning. Greece is an example of the limits of a European welfare state.
Yet, the European project of unifying non-communist Europe into a joint customs, common market, and ultimately a single currency succeeded beyond all expectations. The nations that made up the EU gave up a portion of their sovereignty to join a competitive and effective market, and in the process 17 euro-zone European nations (Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, Spain) gave up their national currencies and adopted the euro.
German reunification in October 1990 prompted the French government to initiate a common European currency: the euro. The French feared a large unified Germany would overwhelm its smaller economy and that of other European neighboring countries with smaller economies. Therefore the French conditioned their acceptance of a unified Germany on Germany’s willingness to give up the Mark – its strong national currency and replace it with the euro.
Today, Germany is no longer in an accommodating mood, as The Telegraph reported on February 15, 2012: “German President Christian Wulff has accused the European Central Bank (ECB) of violating its treaty mandate with the mass purchase of southern European bonds.” Wulff added, “I regard the huge buy-up of bonds of individual states by the ECB as legally and politically questionable. Article 123 of the Treaty on the EU’s workings prohibits the ECB from directly purchasing debt instruments, in order to safeguard the central bank’s independence.” Wulff was commenting on the ECB’s intervention in the Italian and Spanish bond markets this month, which he believes poses a threat to the monetary union and Europe’s financial system. Wulff’s comments are the clearest warning to date that Germany has reached the limits of self-sacrifice for Europe.
The French are in no position to get the EU out of its mess. On August 24, 2011, French Prime Minister Francois Fillon revised the government’s growth forecast for 2011 downwards to 1.75% from 2%, according to the news group Agence France Presse (AFP), saying the measures would trim next year’s public deficit to 4.5% of GDP. PM Fillon added, “Our country cannot live beyond its means forever.” Earlier in August 2011, world markets were rocked by rumors that France might see its credit rating downgraded and that its banks were overexposed to the debts of weaker euro-zone countries. Fillon contradicted President Nicolas Sarkozy’s assurances which hold that the French financial system is not at risk, by warning that “France had passed the debt tolerance threshold.”
The people of the European Union are undergoing a malaise which is a by-product of economic decline and political uncertainty. Europeans after WWII ceased believing in God, and sought to live the “good life here and now” without regard for the future. Muslim Immigrants from North Africa, Turkey and the Middle East flooded into Europe as post-war industrialization demanded cheap labor. It changed the face of Europe, and its culture. Americans paid for European defense, which enabled the Europeans to enjoy a most pleasant lifestyle of short work weeks, long and paid vacations on the French and Spanish Riviera. European demography declined below replacement long before workers were no longer needed in the post-industrial age.
The squabbling among the EU member states is on the increase. As was reported by Presseurop on April 5, 2011, Italy is drawing up a decree to prevent French interests from taking over Parmalat, its agrifood industry flagship.
Another flash point has been on policy over Libya in 2011. The French, who sold Gadhafi Mirage fighters back in 1970, were, under President Sarkozy, engaged in mobilizing the aerial attacks on Gadhafi’s Libya along with Britain in an effort to force him out. But, the same President Sarkozy only three-years earlier had warmly welcomed the Libyan dictator at the Elysee Palace and denounced “those who excessively and irresponsibly criticized the Libyan leader.” Sarkozy announced to the press that, “He (Gadhafi) is the longest serving head of state in the region,” as he rolled out the red carpet for Gadhafi.
In contrast to France and Britain, Silvio Berlusconi, Italy’s Prime Minister at that time, maintained a close relationship with Gadhafi, and sought avenues for a negotiated and honorable exit for the dictator rather than war.
Immigration is another contentious point between Italy and France. The Italian Island of Lampedusa has served as an entry point to the EU from North Africa. The Italians, who must cope with the unwanted immigrants, resent the French who are stopping Tunisians escapees from the revolution at the France-Italian border and sending them back to Italy.
The EU’s differences in fiscal policies undermined Ireland. In 1998, the growth rate of the Irish economy was 12%, while the average in the rest of the EU states was 2%. To cool the heated economy and protect against inflation, Ireland needed to raise its interest rates. At the same time, in the euro-zone, interest rates were lowered to 3%. The Irish economy began to slide down, and investment in the economy in the third quarter of 2011 fell to its lowest level since records began in 1997.
Members of the 17 euro-zone ECB Board of Directors are unable to set a uniform fiscal policy that would regulate interest rates in these respective states, and the politicians of the same states would not entrust their national destinies in the hands of a bunch of unelected bureaucrats. With the national currency — a traditional symbol of sovereignty and independence — already gone in the euro-zone, a piece of democracy has gone along with it. Moreover, a supra-national body such as the ECB cannot possibly reflect the interests of each individual state.
The euro-zone monetary union is ineffective without coordination among the 17 member-states on other economic aspects of micro-economics, such as taxation of capital gain, etc. The result is an imbalance in the national economies – precisely why Britain declined to join the euro-zone.
As the Greek economy goes south, others, like Portugal, Spain, and Italy, might soon follow, creating what might become a north-south divide in Europe. Today, newspapers in Greece and Italy are already carrying digitally altered pictures of Germany’s Chancellor Angela Merkel in Nazi uniform moving across southern Europe. The “ugly German” is back, blamed for driving other nations into poverty.
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