There’s a comforting story out there that the eurozone is in crisis because of countries such as Greece and Italy have huge deficits and that if they weren’t in the euro everything would be ok. Nonsense! The crisis started in the US … but let’s skip a few passages.
The euro is a strong currency and it’s an international currency, which means any problems with it will impact on the rest of the world, not just eurozone countries. So what are the problems? They are not to do with the euro per se, but with banks and lack of growth in the West. European banks have pushed Greece, for example, to incur into more and more debt and then ditched the country. Similarly, Italy’s debt was more than manageable until European banks started ditching Italian bonds making the rate of debt repayment go sky-high. Why?
They didn’t have confidence in the country and its administration, but also in the EU. Action from European ‘leaders’ has been conspicuous for its absence. One reason is the fear of being booted off by their electorate, who are not keen on austerity. The other is that it’s pretty deliberate, actually. The duo Sarkozy and Merkel seem now to be pursuing a financial warfare. The total immobility is pushing banks to ditch Italian bonds, for example, and increase the credit rate spread. There might be various ‘good reasons’ for this. I’m an optimist so I’m hoping that this attack has a strategy. Is it to ensure that Greece and Italy are really implementing reforms? Is it to show to the German electorate (France is in a mess as well) that the situation is dire and requires structural change? This ‘structural change’ really ought to mean more European integration, NOT less.
Our economic system is interconnected to an unprecedented level, only transparency and co-operation can make it work and can make it fairer. You cannot disentangle a country from another. That’s why it’s so important for the whole world (not just the eurozone or Europe) to save Italy and Greece. There is no such thing as an orderly default, especially if we’re talking about a country the size of Italy.
Yes, it’s the banks’ fault, ‘politics’ let the ‘chaps’ of the banks run amok and increase the gap between the extremely rich and the rest. The ‘trickle down effect’ never materialised and we, the people, had to bail out the banks. That was pretty harsh and unfair, but letting Lehman go bust was the worst mistake they could make. You don’t change the economic system (modern post-industrial capitalism) by allowing a financial meltdown.
Politics needs renewal, but it’s not gonna happen overnight. In the meantime, we need to sort out the problems without causing depression, financial meltdown and war. Gloomy? Think of the French Revolution, how it came about, and into what it descended. Politics tends to follow economic changes, rather than lead them. No, Roosevelt didn’t get America out of recession, the war did because it created an internal economy.
The economic system needs to change. It needs political leadership, but the leaders need to realise that too much is at stake. The recipes are out there (QE, Eurobonds, European financial and fiscal integration …), where is the will?