What is Happening in Europe and Who is to Blame?

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I am no economist, but I have been doing my best to understand the economic problems currently plaguing Europe. Cocktail party conversations have been enlightening, but have only confused me more.

People have strong opinions on whether Greece or Germany is a bad actor and about whether either of these countries, or any other, will leave the euro zone.

In the past week, two articles on this topic have piqued my interest. The first was written by Thomas Friedman for the New York Times, entitled Two Worlds Cracking Up. This is an interesting examination of the economic crisis in Europe, contrasted with the spike in violence in the Middle East.

The second is an article by Paul Krugman, also for the New York Times, entitled Greece as Victim.

While there are many opinions about what has caused the current crisis in Europe, there seems to be general agreement that the euro zone’s lack of a strong, cohesive governance model has contributed to the problems.

The financial problems in the euro zone are a shame. The US economy is also in a state of chaos, and opinions differ on what caused our financial meltdown as well, but at least our entire governing model is not in jeopardy.

Most of us will recall the optimism which accompanied the announcements when the euro zone was established. The concept that the European region would be more powerful if countries gave up some of their sovereignty in order to band together, on its face, was strong.

But as in most things in life, the devil is in the details.

What do you think? What do you see as the future for the euro zone? Do you believe that the lack of a strong governance model contributed to the problems? Do you see a way to remedy this issue or do you think that countries are too unwilling to give up their sovereignty to make this work? Do you think that the euro zone has helped or hurt Europe in the long run? What about in the short run? If you live in Europe, how has the euro zone benefitted or harmed you personally?

Again I am no expert on this – just an interested observer. I would love to hear your thoughts. Thanks so much for reading.

26 Comments

Filed under Culture, Economy, Income inequality, International, Politcs, Poverty, Relationships, Role of Government, Stereotypes, travel

26 responses to “What is Happening in Europe and Who is to Blame?

  1. There have been a lot of interesting commentaries about this on NPR as well (I’m also a Tom Friedman fan and read the Times article as well). Certainly, I have no truly considered opinion, but it does seem to me that with no ability to really regulate the euro (as we are able to regulate the dollar and the attendant costs of goods and services), too much of the responsibility for economic salvation seems to rest with Germany. And how far they are willing to go is another question for which I have no answer. I do think that seeing the desperate struggles in Greece and Spain (and Italy), knowing that there is a limit to how far the French will permit their government to scale back (given that so much of the workforce is union-based with many of their benefits socialized – and costly in taxes already) – the situation is frightening. Friedman is correct when he writes that the world is flat – we are all impacted by that which is happening elsewhere on this ever shrinking planet of ours. Great and thought-provoking post!!

  2. In my opinion, it’s really easy – too much debt. People living beyond their means. When I say people, I’m actually thinking about governments too.

    Greece is in so much debt the only way to get them out of it is to put them in a couple hundred billion more euros of debt …ah, no. Just putting off the inevitable.

    The solution – let them fail. Everything will suck for awhile but they will come back. Too big to fail is to big to exist.

    Who’s to blame – the people in debt. This is the main problem – everyone wants to blame everyone else.

    This will catch up to itself eventually. Only a matter of time. Go buy another ipad, iphone, flat screen TV and car …keeping up with he joneses

    • I am no economist, either. But this seems right. What is happening on a personal level where credit card debt is in the millions of dollars is happening on the state, national, and global level as well. We need to cut back on borrowing and start to pay back what we owe. All of us.

      • Neither am I, but it seems like that is part of the problem …everything is made out to be so complicated by the economists these days …you borrow 75% of revenue at 5% interest than loan out 125% of that at 6% interest over 10 years minus tax write-offs giving yourself 25% of revenue to increase productivity minus the interest paid out which inevitably goes up minus inflation and don’t forget to add in the guy skimming off the top plus everyone wants a raise and add 10% for the unforseeable items plus the increase in items that aren’t included in the rate of inflation divided by population growth and god forbid there is a war times the number of illegal people who live in the country that aren’t accounted for but just realize your lending out 50% over what you actually have so if anything goes wrong with the lendee …done. All about greed and making money. Unfortunately it’s the guys who are just trying to get by and be happy than more times than not get hit the hardest by it.

        How about this – your government has ten million euro – you can only spend up to ten million euro. Simplistic and some would say stupid, yes, but it works.

        • Stupid? No. Common sense? Yes. Perhaps that’s what more of those people need!:)

        • Ha! My head hurt just reading your case scenario. But I certainly understood your final statement. This is one of the many times that I wish I understood economics a little better. I have believed Krugman’s arguments, especially because I know the spending restrictions on the state level in the United States which make it hard to dig out of an economic downturn. But I am having trouble reconciling his arguments with what is happening in Europ right now. I guess the fact that these are all independent countries with their own histories and spending habits makes this a very different issue. And it is hard to have a lot of accountability in that picture. Thanks so much for reading and for joining the conversation to help me think through all this!

      • True. But where does Krugman’s argument about the federal government being the only ones who have the ability to help us make investments to get out of the recession? He advocates going into further debt in the short term by making wise investments in infrastructure and jobs, right? Maybe there is some middle ground and we are starting from very different perspectives in terms of our recent spending…? Still learning, so thanks for helping me think through this.

  3. It seems to me like a bunch of global affecting things are converging into each other at the same time….a red flag recipe. I’m one who takes in different bits of media I see and puts together puzzles…the puzzle that’s being put together lately is concerning but I am trying to remain optimistic. I’m hoping that others in positions of power have enough foresight to see the puzzle being put together also and will make the necessary adjustments before it’s completion.

    • I think you are abolutely right about a bunch of global things affecting each other. Thomas Friedman’s article really focuses on this. It is hard to see all the moving parts as once, so I am trying to piece together the puzzle as well. Thanks so much for reading and joining the discussion!

  4. While I am no expert in global economics, it seems to me that many governments are spending beyond their means, relying on bail-outs to keep their countries afloat. The problem appears to be global. One country bails out another, while it is also in financial trouble. How can that work? Like any normal household, if you spend far more than your income, eventually it will catch up with you and you’ll end up declaring bankruptcy. Whether the country is Canada, the U.S. or a European country, if you are running the government at a deficit, you’re just digging yourself into a deeper hole!

    This is just my opinion, of course. My hubby and I discuss financial stuff all the time, usually it’s him telling me we don’t have the money for such-and-such, so I just sigh and say, ok, we won’t buy that this month. Governments should have husbands that tell them they can’t spend what they don’t have. too!

    • Ha! The way I have heard this described, Germany appears to be the husband in this picture. I am a fan of Paul Krugman and have read his thoughts on enhancing federal spending in the United States to help us recover from the recession. That is what confuses me a bit about the European situation. It seems that they have been trying to do this – but perhaps they have been spending in the wrong areas. For me, it is still pretty confusing, but the comments are helping me undersand it much better, so thanks for that!

  5. Great post and comments. One issue that is not talked about enough is the aging environment in many countries, including the US. It is worse in other countries than here, which means a significant amount of benefit obligations that have been promised are due or are close to becoming due. This places huge pressures on countries that have large governmental or public pensions and retiree medical benefits. This is a key reason France delayed the normal retirement benefits and the resulting backlash. We have already started seeing these reitrement obligations causing pressure that led to bankruptcies in Harrisburg, PA and Birmingham, AL. Unless, California does something, they may follow suit. So, debt is a huge issue, but the cost of these promised benefits which permit early retirements is being spread over a smaller workforce is another big problem.

    • As usual, you are absolutely right! It will be interesting to see what countries do to deal with the promises they made. And what happens to people if those promises are not kept. Very complicated. Thanks for helping illuminate the discussion, as usual.

    • Jennifer, it was interesting to see on the PBS News Hour last night an article on the growth in unfunded public pensions and retiree medical benefits – 34 states are beneath the desired 80% funding level. This morning I noted some German officials (who has an age 68 normal retirement) are balking about bailing Greece out with its age 58 normal retirement and 80% of pay pension. Their question is why should we fund your sweet deal.

  6. There was a time when countries did not print more money than they were worth but now they do and it’s the US and Canada too! Just like when we as individuals do not live within our means and pay the price….so it is with countries as well. Not sure what the answer is but our current system of economy is not working throughout the world.

    • I agree. And we are all so interconnected now. I can’t help but believe that the immoral activities of the bankers in the US played a role in all of this! Thanks for your comment!

  7. I have nominated you for the Illuminating Blogger Award…..http://makebelieveboutique.com/2012/06/19/2842/
    Enjoy!

  8. Pingback: No More Golden Parachutes for Firefighters! Why Are Pensions Always the First to Go? | newsofthetimes

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