With billions of dollars pledged to keep Greece and the entire eurozone from drowning financially, Germany has been pushed to take a leading role in the future of the EU.
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Normally, the sun-drenched streets of Athens in late spring would be filled with visitors arriving by cruise ship to admire ancient ruins, stroll city streets and beautiful sandy beaches, or browse shops and partake of the local cuisine.
Instead, usually bustling hotels remain largely vacant as a result of the widely reported escalating violence that has overtaken the nation during its prime tourism season.
Frustrated by the devastated economy and newly accepted austerity measures, gas-masked Greek citizens armed with sticks and hurling Molotov cocktails at cars and buildings roam the streets, smashing shop windows and torching businesses. An angry mob of tens of thousands even set fire to a bank, killing three employees and seriously injuring four others, including a police officer who protestors fire-bombed and left burning in the street.
Because of its rapidly deteriorating economy and inability to meet ballooning financial obligations, Greece hesitantly struck a deal with the European Union and International Monetary Fund (IMF) for a massive $1 trillion bailout. The three-year Financial Stabilization Mechanism shores up $670 billion from the EU, along with $370 billion from the IMF for Greece as well as other eurozone countries. Member-states that fail to curb their spending habits under the rescue program face debt restructuring, or expulsion from the eurozone.
In an unprecedented additional move, the European Central Bank announced it would buy faltering states’ private and government debt in an attempt to calm markets by reassuring investors. Germany bought the largest share—$652 billion.
European officials are nervously aware that the problem could spread to Portugal, Italy, Ireland and Spain, which could destabilize the euro and world markets while tainting the European Union’s prestige.
As EU power brokers, mainly France and Germany, scramble to avert an all-out debt crisis within member-states, leaders are between a rock and a hard place—forced to weigh financial self-preservation against sustaining dependent nations. In effect, the trillion-dollar stopgap seemingly puts a band-aid on a gaping wound of rampant overspending.
During a Confederation of German Trade Unions (ETUC) conference in Berlin, The Associated Press quoted German Chancellor Angela Merkel as saying, “We didn’t do more than buy time to get the differences in competitiveness and budget deficits of euro zone countries in order.”
Yet, if billions of dollars are only a makeshift fix, what further drastic measures will EU member-countries have to take to survive future crises?
The concerted effort among member-states in the European Union has not been without problems. Analysts fear the trillion-dollar safety net may fail to help geographically disadvantaged countries with non-competitive economies to meet the zone’s stringent monetary requirements.
Despite their cooperation in rescue efforts, the Netherlands, Austria and Germany are not pleased with bailouts or debt restructuring. The German populace in particular resents being Europe’s “cash cow” for fiscally irresponsible and economically uncompetitive countries. A recent poll revealed that 59 percent of Germans think Berlin should return to its pre-euro currency and its own central bank—the well-established deutschmark and Bundesbank—and one in every three Germans believes the euro will not survive the next decade.
According to analysts, however, the economic and political cost of reconstituting a new European Union based on Germany’s historically stable currency would pale in comparison to the future burden of financing the eurozone’s $3.8 trillion debt load. So it appears Germany may well have to bear with the struggling union.
Still, the German economic powerhouse is taking a hard-line stance against paying for others’ mistakes. In an interview with the Berlin newspaper Bild am Sonntag, Chancellor Merkel said that in the future countries should face sanctions and be stripped of EU voting rights if they fail to adhere to euro Growth and Stability Pact rules on debt. During another interview, she said they should face expulsion from the union itself.
Upset with Germany’s reluctance to help Greece, French President Nicolas Sarkozy threatened to leave the eurozone if Berlin refused to stay the course with its commitments pertaining to the bailout.
“History tells us that one way or another, Germany is going to have to open its wallet to end this crisis, as it has so often in the past,” a BusinessWeek editorial stated. “But simply handing out money won’t fix the imbalances that caused the crisis. For years, skeptics in the U.S. and Britain have argued that the euro experiment was doomed to fail. Now even true believers are concerned that something must be done, and soon, to relieve the mounting stresses on the system.”
After the EU passed the mammoth rescue package to prevent a financial pandemic, ripples of fear and waning investor confidence continued to spread through world markets. With the euro at a new four-year low and moving toward parity with the American dollar, investors globally are seeking more secure markets—stalling growth for the eurozone.
“It’s not just a European problem, it’s the U.S., Japan and the U.K. right now,” Ian Kelson, a bond fund manager in London with T. Rowe Price said in The New York Times. “It’s across the board.”
But it is not just political leaders and analysts that are concerned about the far-reaching implications of Europe’s financial turmoil.
With the deepening global economic meltdown, Pope Benedict XVI continues to emphasize a need for a change in approach to government and the economy.
“The crisis and the difficulties that international relations, states, society and the economy are currently going through…are largely due to a lack of trust and of adequate aspiration toward solidarity,” he said to members of the Vatican foundation Centesimus Annus, a group formed to promote the church’s social doctrine (AP).
In early May, at the 16th Pontifical Academy of Social Sciences conference, themed “Crisis in a Global Economy – Re-planning the Journey,” the pope said the current economic system “driven by self-interest and profit-seeking” is incapable of regulating itself “apart from public intervention and the support of internalized moral standards” (Zenit).
The conference title came from a line in the pope’s 2009 encyclical letter, “Charity in Truth,” in which Pope Benedict stated, “The current [financial] crisis obliges us to re-plan our journey, to set ourselves new rules and to discover new forms of commitment, to build on positive experiences and to reject negative ones.”
In the same letter, Pope Benedict described a solution: “In the face of the unrelenting growth of global interdependence, there is a strongly felt need, even in the midst of a global recession, for a reform of the United Nations Organization, and likewise of economic institutions and international finance, so that the concept of the family of nations can acquire real teeth.”
In the past, the Vatican has repeatedly played a role in helping unify Europe—often with Germany at the helm—and will inevitably do so again.
To understand more about the historical role of religion in European politics and how it will again influence the continent, read “‘A True World Political Authority’...With ‘Real Teeth’ – History and Prophecy Align.”