With the elections in Greece looming ahead, many right wing pundits are bracing for the expected rejection of austerity measures, with even the Rupert Murdoch owned Wall Street Journal hyping up a Greek exit from the Eurozone as the likely outcome. The proclaimations that Greece is the canary in the coalmine, that the only major financial block independent from the United States is teetering on the bring of collapse, is not only premature, it is delusional.
They continue to see the European Union as independent countries, when at this point they are closer to States within the United States under a weak federal system, a kind of half-way step between the Articles of Confederation and the Constitution. The EU is instead a prime example of what the “States Rights” advocates are asking for, neither fish nor fowl, with severe issues lying underneath it all.
When the EU was organized, it was done in such a way that the financial structure was to be unified, while other aspects were to remain separate. In other words, it was not to become a “United States of Europe.” To make this work, they thought that a strict financial order would be sufficient to prevent a financial crisis. The idea was keep debt at a minimum, keep government control firm, and the EU would avoid financial strife.
The problem became that, because the financial system was unified, no individual states could print their own currency and so their liquidity became interdependent. This works for the United States because we have a unified federal government which maintains the interstate and international commerce, allowing a unified front for each state to work with, an open environment and standard. They could trust each other. No such provisions exist for the Eurozone, and that comes at a heavy price. As a result, the monetary policy of the EU is inflexible, and investors have lost confidence in the Eurozone.
I do not believe for a moment that Greece will leave the EU, but this election will have serious consequences for Europe. If the election goes as predicted, Greece will reject the austerity measures forced on it, and, instead, take a bold path to growth. This does mean that the EU central bank and its leaders now have a situation on their hands, in that they have threatened to expel Greece from the EU according to this report from the Associated Press, carried on BusinessWeek. If they let Greece engage in its own recovery methodology, they risk that their demands of austerity will similarly be rejected by far larger member states. If they expel Greece, they risk fracturing the EU itself, demonstrating that a single crisis will be all that stands between any nation being a member or not. This hard line put forth by the European central banks has come home to roost, it is only a matter of time before a nation tells them no, and the secret to the EU survival rests in what the banks do then.
The elections Sunday pits the newly formed “Recreate Greece – Action – Liberal Alliance” coalition against the newly formed conservative party created by the merging of the three largest parties: the New Democracy and Democratic Alliance parties as well as the far left Syriza Unionist Social Front. How this change in political alliances will change the results at the polls is up in the air, Greece bans public polling for the 14 days prior to the election, but come Monday morning, a new sun will rise over not only Greece, but over Europe itself.
Sign up to have all the AddictingInfo you can handle delivered directly to your email here!