In September of 2008, it all began with Lehman Brothers. Dozens of banks went down in America through late 2008 and early 2009, when the calamities of the financial storm reached Europe. The Old Continent fared a little better in comparative perspective, but the European experience also exposed a dangerous fallacy onto which one pillar of the old system rested – that states cannot go bankrupt. This assumption was shattered into a million tiny pieces when the mythological failure of Greek public finances prompted the European Union to work with the IMF in setting up a 110 billion euro relief fund for the Hellenes.
Then, the neoliberal Celtic tiger not only jumped too high, but also broke its back when it landed. In the 1990s and early 2000s, rapid growth made Ireland a reference model for economic development. Relatively recently, Dublin denied the need for a bailout when all other signs pointed towards a political settlement that saw Brussels transfer 85 billion euros to the country; the Guardian offers a comprehensive archive about the events surrounding this bailout. If Ireland dubs its young ‘the lost generation,' it’s back to its traditional export – immigrants.
Connected with these two is the fate of the Eurozone. If you ask NYU economist Nuriel Roubini, he will say that its days are numbered. Germany has hinted towards returning the Deutche mark and the Czechs poured additional fuel in the fire by suggesting an opt-out clause be added to Eurozone membership.
The next question relates to the coordination of fiscal policy at the EU level. The main idea is that national budgets are approved by the European Commission, much like monetary policy is managed top-down with the euro, to make sure that no state acts in a way that can threaten the stability of the greater European fiscal context.
There is the final implication of social policy. Government funding in education, health, and pension sectors is showing a trend towards downsizing and optimization. The pressures for implementing a higher retirement age in France were felt when the millions of Frenchmen and women showed a revolutionary complex against Sarkozy’s proposals. Across the Channel, student protests in Britain are bordering on riots over Cameron’s cabinet initiative to triple tuition rates to an average of $14,000 per year. Italians are up in arms about the austere cuts proposed by the Berlusconi government that would see 130,000 jobs and 9 billion euros cut from the education budget through 2013. Healthcare reform is a particularly painful question in eastern Europe, where 20 years of mismanagement in the sector have left it screaming for reform and no clear vision of how to do it, when the Western half is experiencing so much social turmoil.
There are several questions to be addressed: the impact of the IMF’s bigger role in state finances, increasing social inequality, and the future of the euro. Along with that, who is going to be the next to fall – Spain or Portugal?
Ladies and gentlemen, the bets are open.
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