EU: Crisis at Worst, Lost Decade at Best

EU: Crisis at Worst, Lost Decade at Best
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Last Sunday, CBS – 60 minutes broadcasted an interesting report on the state of the European Union and its short /mean economic perspectives. There is a problem with all the growth forecast perspectives, including the one underneath published by the Economist. When a country like Spain is unable to borrow sufficient funds to cover its expenses, when Greece internal consumption if fading and when Italy is unable to enforce a proper fiscal policy, bailing out countries with the European Central Bank funds is just a way of delaying the inevitable. Germany won’t eternally be the savior of the failing European Southern states nor the forced French Ally in trying to save the Euro. There is a strong probability that the French government will turn Socialist by the next presidential elections and their misalignment with the current German government is obvious. Social tensions will stress Europe as unemployment continues its slow but relentless increase among all the population age groups, and especially the young. Will Greece leave the Euro zone in 2012? Will Spain default and drag the rest of the Euro zone into a deep financial crisis that the European Central Bank wont be able to contain? Even if this worst scenario is avoided, the Euro zone will face a long and tedious crisis that some already call the lost decade.

(CBS News) Ten European countries are in a recession. In order to avoid default, three have needed bailouts from the European Union and the International Monetary Fund, and more might be necessary. What’s at stake? A lot, including the future of the currency, the euro, and the health of the United States’ largest trading partner. Steve Kroft reports on the European debt crisis, including how the austerity measures being demanded of Greece are rekindling the ghosts and even enmity of World War II.

The following script is from “An Imperfect Union” which originally aired on April 8, 2012. Steve Kroft is the correspondent. Graham Messick and Coleman Cowan, producers.

There are only a few things that could derail the U.S. economic recovery that finally seems to be underway, and one of them is the debt crisis in Europe, along with the recession that is now sweeping across the continent.

It’s similar in many ways to the financial crisis that leveled the U.S. economy in 2008. Except that in Europe, it’s not just the banks that are in danger of going broke, it’s entire countries. Greece has already defaulted on more than a hundred billion dollars of public debt. Ireland and Portugal have needed massive bailouts to stay solvent. Italy and Spain are just hanging on in what has turned out to be an imperfect economic union. At stake is the survival of the European currency, the euro, and the economic future of America’s largest trading partner.

The European Union has all the accoutrements of nationhood: its own flag, its own anthem, its own parliament, its own huge bureaucracy, and its own currency, the euro, shared by 17 of its 27 members. It’s a loose economic alliance of countries and faded empires — with different languages, cultures and customs — that have more or less been at war with each other for a thousand years. Until recently, their monetary union had brought stability and prosperity to the continent’s social democracies, producing good wages, generous benefits, long vacations…but Louise Cooper, a top financial analyst in London, says the European holiday is over.

Sources: CBS News / The Economist

Photo Credit: Expo 92 – Seville – Access to monorail station By Lars Plougmann / FlickR

The Universal Exposition of Seville (Expo ’92) took place from Monday, April 20 to Monday, October 12, 1992 on La Isla de La Cartuja (Cartuja Island), Seville, Spain. The theme for the Expo was “The Age of Discovery” and over 100 countries were represented. The total amount of land used for the Expo was 215 hectares and the total number of visitors was 41,814,571.