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A European Perspective on Our Debt Crisis

from the March 05, 2013 eNews issue

The current budget impasse, that has frozen our economy here in the US, has been in a stalemate for over 4 years so far. Each side has refused many times to make any concessions away from their fiercely held positions.

With the national debt growing at an ever quickening pace the time for a “non-catastrophic” solution is dissolving. Some say it is too late even now. We are not alone in this situation though. Some of the refusal to compromise may be due in part, possibly great part, to the contemporary examples outside our borders.

Because of the fundamental structure of the European Union (EU), economic turmoil has shown itself much earlier than the US. Being comprised of multiple national economies they have the advantage of “compartmental” damage control. Individual economies can show weakness without a catastrophic collapse of the rest. The downside of that type of structure is that by the time the weak economies are showing symptoms of their maladies their individual failures are eminent.

The EU finds itself fighting to “save” several member countries whose failure would threaten total collapse of the social and political philosophy upon which it was established. Greece, Spain, and Portugal, along with many of the recent eastern European countries, are at threat presently. Those not mentioned above have been themselves crippled enough as to not be able to assist in any economic bailout. Of course the exception is Germany.

Germany is the last remaining country capable of economic assistance. They, though, are becoming more and more resentful that they are expected to be the lone supplier of cash to economies that seem have an insatiable hunger with no end in sight. The German people are becoming increasingly nervous that the their economic coffers may be used so frequently and deeply that even their economy, and thus society, will suffer the unrest and turmoil they are seeing in their neighbors.

All of these economies (including the US) suffer from massive national debts. Of course, the obvious solution to this is to stop borrowing. Simple. But the way in which this is done is where the magic has to happen. Although we would like to believe that an across the board cut in budgets is the easy answer, will the people, addicted to a certain standard of living and the effort presently required to attain it, put up with a severe reduction in available goods and services?

This is proving to be an important question that is being played out in real life among the member nations of the EU. Presently, we are seeing what not to do. We are also getting stark a “look ahead” at what happens if we choose unwisely.

Recently, many EU administrators have publicly voiced optimism about the future economic status of the EU. As in the US, this could be truly their evaluation or just another attempt to “prop up” the expectations of their own markets. Also, as in the US, they have been reporting that the worst of the crisis is behind them. Even as such declarations are made, actual events seem to contradict their assessments.

In Portugal many thousands of protesters have taken to the streets of their capital, Lisbon, and other cities to demand an end to the government’s austerity measures while calling for the resignations of many high ranking officials. Unfortunately, the EU points to Portugal as a “success” in the aftermath of their recent economic bailout. But since the bailout, unemployment has doubled to an incredible 16% of the country’s workforce. In the last year and a half, it has been reported that over a quarter of a million people have left the country due to unemployment and/or economic contraction.

Its neighbor Spain has not had a much better go of it. The government this month announced that over 5 million people are unemployed, the largest volume in the last 30 years. With the recent reports in the news of suicides attributed to home evictions, there has been widespread public protest.

Meanwhile in Greece, who has for sometime been enduring protests to social austerity, there are reports of widespread shortages of essential supplies predominately in the medical community.

Wherever you look for example, the news is not good. As Washington tries to come to grips with the debt crisis and tries to find a solution, they are paralyzed by the many examples of what not to do. With no clear solution in sight, this does not portend well for a quick and effective resolution to our current budget negotiations impasse.

No one wants to “own” an already failed idea. And, it appears, no one has a new idea. What remains is surviving the cliff that is quickly approaching. The idea that “they” won’t let this happen is quickly sounding more and more hollow. Good thing we have the Lord.


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