Greece's Fatal Crack in the EU

by John M. Curtis
(310) 204-8700

Copyright May 5, 2010
All Rights Reserved.                                

               Greece’s debt problems exposed the ugly truth about the European Union:  That it’s no real union at all.  Unlike the United States that shares a common federal government and U.S. treasury, the EU remains a loose economic federation designed to bolster an artificial currency, a type of monetary hybrid, averaging the collective currencies of Europe’s disparate economies.  Expecting Greeks, for instance, to somehow compete with the mighty German Deutsch mark or powerful French franc was unrealistic.  Back in 1999, when the European Union adopted the euro as its common currency, reservations were drowned out by the euphoria to finally compete with the United States.  But unlike the U.S., Europe’s long history dates back before the Roman Empire, evolving separate languages, cultures, work ethics, and, ultimately, viable economies. 

            Less industrialized or manufacturing-based economies, especially in southern Europe, could not possibly be expected to pull their weight against the more industrialized north, like Germany, France, Netherlands and Belgium.  Today’s Greek crisis is the tip of iceberg for the EU, unable to hold together its artificial union built on a false premise that less industrialized economies could achieve parity with Europe’s established, powerful economies.  Pulling cash out of the German or French economies to bailout Greece does nothing to deal with fundamental flaw in the European Union:  That each member-state should demonstrate equal financial autonomy and self-sufficiency.  With the euro plummeting to eventual parity with the U.S. dollar, the EU bailout does nothing to deal with Greece’s own internal needs.  Rioting and deaths on Greek streets highlight the EU’s dilemma.

            Greece and other EU countries with struggling economies, like Italy, Spain, Portugal and Ireland, to name a few, must beg the Frankfurt-based European Central Bank for cash.  Back in 1999, Great Britain refused to join the European Union, preferring, for better or worse, to retain coinage rights, namely, to control and print its own currency.  Once countries went on the euro, they could no longer deal with currency shortages, without begging the ECB.  Greece’s current bailout provision, accepting intolerable austerity conditions for borrowing $142 billion, staves off a default on an estimated $387 billion debt, but requires draconic cuts in public employees’ salaries and pensions.  Accepting the EU’s conditions, the Papandreou government forced the Greek population into a kind of slavery to the EU.  Street protests won’t stop until Greeks achieve independence from the EU.

            Rioting broke out in Athens over Prime Minister George Papandreou’s expected government salary and pension cuts.  Three bank workers in their mid-thirties died of smoke inhalation when protesters torched offices with Molotov cocktails.  Greece’s socialist government can’t pay for all the government-promised benefits as long as they maintain dependence and connection to the EU.  Watching the euro plummet amid growing Greek anarchy, EU President Herman Van Rompuy insisted the financial concerns about other European countries had “absolutely nothing to do with the situation in Greece.”  Other cash-strapped European countries face the same problems as Greece, though not as severe.  “Nothing less than the future of Europe, and with that the future of Germany in Europe, is at stake,” German Chancellor Angel Merkel told the Bundestag, the German parliament.

            Merkel and other EU members haven’t caught up to real-time that the one-size-fits-all euro doesn’t work for less industrialized European countries.  “We are at a fork in the road,” said Merkel, expecting her counterparts at the Brussels-based EU to accept that Europe’s more industrialized states have their own problems and can’t subsidize debt in other EU countries.  Whether admitted to or not, Merkel knows that the euro doesn’t work for Europe’s less prosperous nations.  It’s too overvalued and subject to inflation by international currency traders, to work for countries needing control of their own currency.  Whether Germany or France retains the euro, letting less industrialized opt out is the only realistic path going forward.  More delays only push other European countries closer to insolvency.  Greece’s problems mirror the same economic woes faced by other European countries.

            EU members must face the music that the 11-year experiment with euro may be nearing an end.  Forcing any European country to renege on salary and pension obligations to its government workers is outrageous.  Greece’s mild riots reflect growing discontent with an unsustainable economic system, denying EU members the right to manage their own currency and debt.  “Most of these lingering problems relate to the fact that excessive amounts of debt have bee accumulated prior of the financial crisis.  It’s going to take time for these to be worked through,” said David Joy, chief market strategist for $340 billion U.S.-based asset manager Columbia Management.  EU members’ debt relates not to irresponsible extravagance but to the euro’s inflated value, robbing economies of enough cash.  Europe’s debt crisis can only be solved by ending its failed experiment with the euro.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.