The recent financial crisis in Greece could be an illustration of the "fragility" of the EU as an economic, political, and social entity.
Long before the effective circulation of the Euro in Europe(late 1999)
the treaty of Maastricht (1992) has established strict financial criteria for countries who wanted to be part of the European currency.
These criteria related to the percentage of the public deficit to the national GDP and the ratio of the national debt to the GDP. Countries who met these criteria were welcome to join and those who did not, were asked to work their finances and come back at a later date.
As of Today, the Euro is the currency in 16 European countries.
The current debt crisis in Greece might have been rooted in the history of the
European Union and the Euro itself. The treaty of Maastricht has put too much focus on the financial criteria to qualify for the Euro and not enough attention to social criteria that are equally important. As a matter of fact, no one would argue that the economic, financial and social structures in a country are independent from one another. The lack of definition of the "social" pillar of the European Union has also led many convinced Europeans to call for voting against Maastricht. The late Philippe Seguin (Speaker of the French Parliament) was an ardent opponent to that treaty and he had a memorable debate with the late French president Francois Mitterrand in the days preceding the French referendum on the ratification of the treaty of Maastricht.
The lack of "social homogeneity" across Europe could have led to the economic troubles that Europe is presently going through. Disparities in areas like retirement age, unemployment benefits, social services and labor laws have a direct impact on the economic and financial situation of any country.
For instance, one could easily understand why the Germans are reluctant to jump in and help Greece when we know that people in Greece can retire as early as age 57 while the minimum retirement age in Germany is 63.
As they debate the most adequate way to help Greece, European leaders should look more broadly on the underlying causes and put forward a plan towards a better harmonization of European policies. Such harmonization would strengthen the EU and make crisis such as the current one less likely to occur in the future.
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Well, I am not sure I agree w your comments. Let's put it in perspective w the financial situation in Iceland, Hungary or Estonia. These countries are out of the euro area and suffer much more from the financial crisis. The euro system acted upon economy as a choc absorber. The euro policy has been criticized during the liquidity crisis but the BCE just acted as planned. If the BCE would have acted as the politician wanted (increasing money quantity) the BCE would have no credibility.
ReplyDeleteAs for the greek crisis, let's not forget that this country received a lot of European funds to develop, as Spain or Portugal did. In addition none of the strict budget control policy were enforced in reference to the treaty of Maastricht. It is interesting to see that these other countries are in the target of the financial institutions. Funding a European social system would not change the financial system unless this is what it means to fund a common political and social system. International commerce is taking place upper the head of the nations and gains benefits from the expansion of the financial system. The current debate over financial regulation is interesting but does not seem to guaranty any fundamental changes. For now they are just the premise of a possible change. We’ll see what happen in the Goldman Sachs upper management trial and whether or not the Moral Hazard will be taken into consideration.
Hi "Frog";
ReplyDeleteThanks for your comment. I honestly don't
see your viewpoint as opposed to mine. You
are looking at the issue from a different
and a complementary perspective.
The lack of transparency, enforcements and regulations are also valid reasons for the current convoluted crisis.