American Prospect
August 4, 2011
With America’s debt-ceiling crisis resolved, the time is ripe for a brand-new set of financial calamities on the other side of the Atlantic. The “rescue” plan for Greece put forth by European leaders on July 22 is unraveling with surprising speed. The relatively narrow scope of the solution seems to underscore how little political will there is to resolve the underlying issues with the European economy.
Those structural problems are now wreaking new havoc. On Tuesday, the Italian government called an emergency meeting and Spain’s prime minister canceled his vacation because the crisis is getting worse in bigger countries than Greece. Even France has the jitters, now needing to pay a 0.75 percentage point premium on its debt over Germany’s. That’s still a small number, but it’s the highest spread since the introduction of the euro. The premium reflects, in other words, a growing sense that the euro project may collapse.
The problem is that Europe’s leaders looked at a situation driven by inherent flaws in the architecture and responded with solutions narrowly tailored to Greece’s unusual problems.
Greece is a small country and, relative to its European peers, rather unique. It’s one of Europe’s poorest in terms of per-capita gross domestic product, and, with its history of tax evasion and government fiscal shenanigans, it’s been legendarily mismanaged. It now appears that Greece never actually met the criteria for membership into the Eurozone and basically skated in with fraudulent accounting. On the one hand, all this has meant that Greece’s financial difficulties are unusually severe. On the other hand, though, they were manageable. Most of all, they were created by shady budgeting. If Greece’s problems began and ended with irresponsibility that would mean the country’s trouble only threatened the structure of the euro. Instead, it was a sign of a larger Euro problem.
More
No comments:
Post a Comment