Greece may be the cradle of civilization but it’s being regarded throughout Northern Europe these days as little more than a beggars’ colony. This is because Greece is now looking to richer member states of the European Union, like Germany and France, to bail it out of an existential financial mess.
No doubt many Europeans would like to swat away the Greeks the way they swat away the Roma (Gypsies) who panhandle all over the continent. They are all too mindful, however, that Greece’s membership in the EU means that if it implodes financially, the collateral damage for the rest of them would be incalculable.
All the same, Greece might be the least of the EU’s problems. Because just yesterday Standard & Poor downgraded Spain’s debt too, turning it into the third financial ticking bomb in the South, along with Portugal and Greece, that rich EU countries from the North must now diffuse.
It seems to be one (downgrade) after the other. Only a few months ago it looked like it was contained to Greece and in the last 24 hours we are seeing the contagion effect having a firm grip across Europe.
(Manoj Ladwa, senior trader at ETX Capital in London. Reuters, April 28, 2010)
Actually, here, in part, is how I diagnosed this financial virus over a month ago:
[T]he so-called “PIGS” (namely, Portugal, Italy, Greece, and Spain) have been arguing that the sovereign debt crisis that is threatening to plunge their respective countries into bankruptcy is a burden all of Europe should bear. And everybody knows that a default by any of these PIGS will cause the disunion of the European Union.
(“A Europe divided by debt cannot stand,” The iPINIONS Journal, March 25, 2010)
Remember too big to fail? The US government felt compelled to bail out Wall Street because failure to do so would have sent the U.S. economy into a great depression. Well I predict that the EU will feel compelled to bail out these PIGS based on similar reasoning.
It is hardly surprising, though, that most Europeans are developing as much contempt for the PIGS as most Americans now have for the bankers on Wall Street. Not least because rich member states in the North believe that their poor relations in the South have nothing to blame for their financial woes but their own “Club Med” approach to fiscal discipline:
[A]t the end of the day, everybody wants to be in Greece because it’s a fun way to get away from your problems.
(Zoe Kazani, a 22-year-old art gallery director in Athens, Reuters, April 28, 2010)
Meanwhile, here’s how Bild, a leading German newspaper, reported (April 27) on the resentment this crisis is inciting among Germans (as well as citizens of all of the other non-swine member states):
Greece is just a bottomless pit. And now anger is increasing in Germany, with many asking why they should pay for things like the luxury Greek pension system.
You’d think that having to go to their betters in the North – hat in hand – would humble the Greeks. Instead, public sector workers have gone on strike in a self-indulgent effort to pressure their government against imposing any austerity measures as a condition for receiving a bailout package from the EU (and IMF).
Workers are protesting public wage cuts, a pensions freeze and tax hikes imposed by the government to try to pull Greece out of a fiscal crisis that has shaken markets worldwide and driven Greece’s borrowing costs to a 12-year high.
(Reuters, April 22, 2010)
Therefore, who can blame the Germans (the French and others in the North) for harboring resentment over having to indulge this Zorba-like attitude among the suntanned citizens of the PIGS…? And I imagine recognizing that refusing to bail them out would be tantamount to cutting off nose to spite face only intensifies their resentment.
Related commentaries:
A Europe divided by debt cannot stand
Leave a Reply
You must be logged in to post a comment.