Learn crucial lessons from Europe’s debt mess
Voters in France and Greece recently rejected austerity measures. But while elections can give political power to the winners, they can’t give Europe an easy way out of its economic mess.
European Commission President Jose Manuel Barroso of Portugal made that clear Thursday in a speech to the United Nations. He reaffirmed the European Union’s commitment to a massive ($168 billion) bailout of debt-ridden Greece — but only if “the Greek government, current and future” lives up to “jointly agreed conditions.”
Greece’s resolve for fulfilling that obligation appears shakier than ever after its May 6 elections showed strong resistance to the belt-tightening stipulations of the accord.
Yet the voting didn’t produce a working majority for a new Greek government. Thus, another election has been scheduled for June 17. The outcome could determine if Greece will — or won’t — abide by the EU’s austerity demands and stay in the eurozone.
This could be Greece’s last chance to avoid a financial catastrophe. Unfortunately, though, the repetition of urgent appeals over the last few years for deep government spending cuts there and in other European nations, including Spain, Portugal and Italy, have taken on a “Boy Who Cried Wolf” tone.
But there’s nothing phony about the potentially disastrous implications of Europe’s debt mess — and not just for Europe, as demonstrated by this week’s jittery financial markets acround the world.
Europe’s self-inflicted plight also should teach lessons across the Atlantic about the perils of failing to reform unaffordable entitlement programs.
At least new French President Francois Hollande presented a united front of sorts with German Chancellor Angela Merkel in Berlin Tuesday as they appealed to Greeks to remain in the EU.
Mr. Hollande, as the Socialist party nominee, successfully campaigned against conservative incumbent Nicolas Sarkozy’s austerity program. On his second day as president, Mr. Hollande re-emphasized his advocacy of economic growth — not just spending cuts.
However, standing alongside Chancellor Merkel, President Hollande also stressed the need for “budget seriousness,” adding: “I hope that the Greeks can express in these elections their attachment to the eurozone.”
Certainly British Prime Minister David Cameron aptly expressed the debt problem — and not just Greece’s — Thursday, offering this stern reminder:
“Either Europe has a committed, stable, successful eurozone with an effective firewall, well capitalized and regulated banks, a system of fiscal burden sharing, and supportive monetary policy across the eurozone, or we are in uncharted territory which carries huge risks for everybody,”
Mr. Cameron added: “We all need to address Europe’s overall low productivity and lack of economic dynamism, which remains its Achilles’ heel. Most EU member states are becoming less competitive compared to the rest of the world, not more.”
And more Americans need to understand that Europeans aren’t the only ones who must live within their means.