So far, European leaders have tried to deal with this spreading disaster by ruses. Existing European treaties ban bail-outs of member states. So the “European Stabilisation Mechanism”, recently set up precisely to provide these illegal bail-outs, does so under Article 122.2 of the Lisbon Treaty. This article gives emergency assistance to a member state “threatened with severe difficulties caused by natural disasters or exceptional circumstances beyond its control”.
Natural disasters! We are experiencing a totally unnatural disaster, one brought about by the artificial structure of the European project. Exceptional circumstances beyond its control! It was this system that every eurozone member state proudly (though usually without asking their electorates) voted for.
The situation is not funny for the people of Greece, Portugal, Spain, and so on, because their governments have run up dreadful public debts while sacrificing their power to devalue to become competitive. They cannot cut their exchange rate, so they must cut wages and jobs. Unemployment in Spain is already 20 per cent ”“ and 40 per cent among young people.
It is not funny for Germany, either. German banks are overcommitted in the southern countries now afflicted. The German people are fed up with paying for the profligacy of their poorer neighbours and furious at the suggestion that the only solution is that they should pay even more.
Well, I’ve said for years that the Euro was basically the Deutsche mark in drag. Had Germany not been the centerpiece of the Euro, the whole enterprise would never have gotten enough traction to get off the ground. Now, ironically, the Germans don’t like having to put in the muscle and capital to keep the Euro (i.e. the Deutsche mark) afloat due to non-German economic problems.
And I don’t blame them. They were promised when they signed onto the Euro that no member nation would have to bail out another, and yet that’s exactly what’s happened because the EU can’t acknowledge that the Greek (and soon Spain) problem is not a crisis of liquidity (i.e. the flow of capital is freezing up because of some extraneous and unforeseen crisis) , but is a plain and simple insolvency problem. Greece has been spending more that it can make for years, and been borrowing the balance on credit. Instead of the EU making the Greece lie in the bed its made for itself, Germany has put itself out on a limb to bail out a country that has no incentive now to correct its own mistakes.
Fixing a insolvency crisis by adding another layer of debt onto the already insolvent party is sheer madness.