Europe on the brink of collapse
- By Raul de Sagastizabal
0 Comment(s)
Print
E-mail
China.org.cn, August 2, 2011
As for support programs for countries in trouble, forced to fend for themselves, indebted to unsustainable levels, and then "supported" on condition, the implementation of these adjustment programs will have severe social consequences that take years to reverse and impact on the rest of Europe. We're not saying that Germany, France or The Netherlands should unconditionally bail out such debtor countries – they should certainly have to improve their indicators and spend more carefully, but not in the context of nonviable programs such as those that have worsened their situation and swollen their debts.
The Greek debt, for example, needed restructuring last year, when it was known to be impossible to meet, and the country and the entire euro area were in a better position to renegotiate with banks and investors. Instead, Greece was coerced to implement a bailout package of 110,000 million euros, the largest in Europe. Since then, creditors, with IMF advice, have been evaluating and speculating on the consequences for their economies and banks of letting Greece go bankrupt or rescuing her. Now it is too late. It is not Greece. Greece's bankruptcy would also prompt the failure of other countries in the Southern periphery, and if Greek debt restructuring occurs such other countries would also be called to accept debt-restructuring plans. Despite this reality, Germany, France and their Northern partners continue to consider the convenience of restructuring the Greek debt, under some other denomination, to avoid the specter of contagion, seemingly believing such euphemism makes any difference whatsoever at this stage, considering each of them is implementing selective sovereign-debt reprogramming or repurchasing programs, with compulsory or voluntary participation of private paper holders.
As for the rest of the indebted countries, the Finance Ministers of the European area have just signed a treaty creating a permanent 700,000 million dollars bailout fund, kind of a European International Monetary Fund, which in fact requires the amendment of the Union Treaty and ratification by the member countries. Its purpose is to assist countries in financial difficulties from July 1, 2013.
2013? For the euro zone crisis, 2013 is kind of another century, if anything. Europeans keep playing for time, as somehow their problems might magically be solved.
There are no magic wands. Time may heal wounds, but certainly does not extinguish fires. Without debt restructuring and financial regulation, the collapse of Europe is just around the corner and will quash the uneven and incipient global economy recovery. Europe is not playing with time, it is playing with fire.
(This post was first published on http://www.politicapress.com/.)
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.
