Will Spain and Italy Be Forced Out of the EU?
Will Spain and Italy be forced out of the European Union? Everyone was focused on Greece for a long time. But now Spain and Italy are taking center stage. The battle between the austerity imposed by the EU and the rejection of austerity preached by the political parties looking to take power goes on. Elections in June will tell us who wins the political battle in Greece. Meanwhile the rest of the EU is supposedly gearing up for a Greek exit.
It seems the countries in the EU can't agree on emergency measures to keep Greece in the Union. Germany wants the Greeks to stick with the EU-imposed austerity measures; the Italian, French and Spanish government want to cut them some slack. Of course, they want to cut them some slack because they're facing austerity measures of their own. And the Germans are adamant because they know that once an exception is made for Greece, the others will demand concessions too. And don't forget Ireland - the one country whose people have been putting up with austerity measures with the least fuss. They'll naturally want their austerity programs eased up. In fact, they've already said so. It's only fair.
So Greece is just the tip of the iceberg. Spain and Italy - take your pick - look like they're waiting in the wings for some financial disaster to strike them too. They've got payments due on bonds that they really can't meet, and will expect some sort of deal to tide them over, in exchange for austerity measures. Only the Spanish and Italian people aren't so keen on the austerity thing. We don't read too much about it here in the U.S., but there have been plenty of demonstrations going on, some of them violent. The damn hasn't broken yet, but don't be surprised if it does in one or both countries. Don't be surprised if the Spanish and the Italians tell their governments to take a hike one of these days.
And if that happens, what then? If the Spanish and Italian people refuse to accept austerity measures will the German government take a stand and demand that they do? Will they draw a line and force them out of the EU, assuming that's what happens to Greece?
I don't think so.
Remember that the Germans have been the big economic winners in the EU. They have prospered because they export lots of stuff to the other EU countries. And the monetary system based on the Euro essentially keeps German export prices low enough so that businesses and people in the other countries buy the German exports.
Apparently the Germans make really good stuff at an affordable price. And when you make good stuff at an affordable price, that stuff sells.
Now if a country leaves the EU, it probably won't use the Euro for a currency. That means that it will not be part of the monetary system that keeps German goods relatively cheap. And so its people and businesses will probably buy fewer of those goods. Even if they still think the Germans make good stuff, they won't be able to afford them.
If the Greeks stop buying German stuff, it's not that big a deal. But if either Spain or Italy (or both) were to leave the EU and stop using the Euro, they'd find German goods expensive too. And then sales to those countries would drop off. That's not something the Germans want.
You have to believe that all the back and forth between the Germans and the other EU countries that have austerity measures imposed on them is partly theater. The Germans really can't want these countries to up and leave the EU. And if the people of Spain, Italy, France, etc.get fed up with austerity, as it seems they are right now, the Germans will probably back off. It's just that the German government doesn't want to back off right away since the German people need to feel the German government didn't sell them down the river by agreeing to subsidize the people of the other countries - which is, in effect, what they will probably be forced to do to keep the EU intact.
But in the end, the German people will realize that they'll be slitting their own throats if they are the cause of the EU collapsing. They're probably used to the prosperity that's come their way with the EU.
So, for now, the EU stays together with maybe Greece leaving. Maybe.
But the problem of government spending exceeding revenue and continuing to build up bigger and bigger debts won't stop. And the crisis won't go away until it does.
And so the can will be kicked down the road yet again.
It seems the countries in the EU can't agree on emergency measures to keep Greece in the Union. Germany wants the Greeks to stick with the EU-imposed austerity measures; the Italian, French and Spanish government want to cut them some slack. Of course, they want to cut them some slack because they're facing austerity measures of their own. And the Germans are adamant because they know that once an exception is made for Greece, the others will demand concessions too. And don't forget Ireland - the one country whose people have been putting up with austerity measures with the least fuss. They'll naturally want their austerity programs eased up. In fact, they've already said so. It's only fair.
So Greece is just the tip of the iceberg. Spain and Italy - take your pick - look like they're waiting in the wings for some financial disaster to strike them too. They've got payments due on bonds that they really can't meet, and will expect some sort of deal to tide them over, in exchange for austerity measures. Only the Spanish and Italian people aren't so keen on the austerity thing. We don't read too much about it here in the U.S., but there have been plenty of demonstrations going on, some of them violent. The damn hasn't broken yet, but don't be surprised if it does in one or both countries. Don't be surprised if the Spanish and the Italians tell their governments to take a hike one of these days.
And if that happens, what then? If the Spanish and Italian people refuse to accept austerity measures will the German government take a stand and demand that they do? Will they draw a line and force them out of the EU, assuming that's what happens to Greece?
I don't think so.
Remember that the Germans have been the big economic winners in the EU. They have prospered because they export lots of stuff to the other EU countries. And the monetary system based on the Euro essentially keeps German export prices low enough so that businesses and people in the other countries buy the German exports.
Apparently the Germans make really good stuff at an affordable price. And when you make good stuff at an affordable price, that stuff sells.
Now if a country leaves the EU, it probably won't use the Euro for a currency. That means that it will not be part of the monetary system that keeps German goods relatively cheap. And so its people and businesses will probably buy fewer of those goods. Even if they still think the Germans make good stuff, they won't be able to afford them.
If the Greeks stop buying German stuff, it's not that big a deal. But if either Spain or Italy (or both) were to leave the EU and stop using the Euro, they'd find German goods expensive too. And then sales to those countries would drop off. That's not something the Germans want.
You have to believe that all the back and forth between the Germans and the other EU countries that have austerity measures imposed on them is partly theater. The Germans really can't want these countries to up and leave the EU. And if the people of Spain, Italy, France, etc.get fed up with austerity, as it seems they are right now, the Germans will probably back off. It's just that the German government doesn't want to back off right away since the German people need to feel the German government didn't sell them down the river by agreeing to subsidize the people of the other countries - which is, in effect, what they will probably be forced to do to keep the EU intact.
But in the end, the German people will realize that they'll be slitting their own throats if they are the cause of the EU collapsing. They're probably used to the prosperity that's come their way with the EU.
So, for now, the EU stays together with maybe Greece leaving. Maybe.
But the problem of government spending exceeding revenue and continuing to build up bigger and bigger debts won't stop. And the crisis won't go away until it does.
And so the can will be kicked down the road yet again.
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