After the bailout of Greece, the Euro, the monetary unit of the European Monetary Union, had risen in value in comparison to the United States Dollar. Some of the rise initially was because of the bailout, but most of it was because of the gradual weakening of the Dollar. The Euro has since declined somewhat amid renewed fears about the weakness of some members of the Eurozone and the potential collapse of the Monetary Union.
Austerity is the current trend in Europe, in contrast to the American spending spree. Even the socialist Europeans that United States President Barak Obama admires recently warned him that his overspending is increasing the global danger of inflation and undermining their policies of austerity.
Since then, however, Greece missed its target for its budget deficit. Its Socialist government had misreported some of its figures, an accusation it had made against the preceding conservative government, for which it blamed the crisis, despite the Socialist creation of the Greek welfare state beforehand. Greece will have to increase its austerity measures of spending cuts.
On the other end of the Eurozone, the contagion from Ireland’s fiscal troubles are spreading to Portugal, the next most vulnerable member of the European Union, where interest rates are rising. Ireland needs a bailout, but seems reluctant to admit it out of concern for the negative effects on its creditworthiness such a stigma would produce. Spain, the next most vulnerable member state, is under increased pressure to continue its austerity program.
Despite a political crisis in which the Speaker of the lower house of the Italian Parliament has withdrawn his faction of the ruling party from the government, the center-right factions remain united behind the Italian government’s proposed fiscal reform, which includes austerity. The French raised their retirement age from 60 to 62, which was enough to provoke strikes and riots, as in Greece. There were even some anti-austerity riots by students in the United Kingdom. Such scenes decrease investors’ confidence in the fiscal soundness of sovereign states, which increases interest rates on government bonds, which, in turn, increases the burden of the debt.
The more fiscally responsible Germans understandably feel that they should not have to bear the burden for their more profligate fellow members of the European Union, but their resistance to the bailouts of sovereign states might pull down not only the economies of the weaker individual member states, but the Union itself.
Although a weakening of the European economy would be harmful to the global economy, it would be a consolation to witness the collapse of the European Monetary Union and the humbling of the arrogant supranationalists who created and supported this folly, and the restoration of national sovereignty in its place, as well as a return to fiscal and monetary responsibility.