Europe: Will the Euro crisis deal a fatal blow to the EU?
The Euro crisis is putting the very survival of the European Union at risk. Greece and Ireland debt problems were the first one to emerge, but now it is the turn of Italy and Spain to clean up their balance sheets. The two healthier economies of the union, Germany and France are now considering some measures which are likely to impact the current political structure of the European Union. First of all, will the Euro survive as a currency and further is Europe heading for a split after decades working on having a united political voice on the world stage?
In Greece, today, 30,000 people took to the streets in Athens to protest the austerity measures which a new national unity government wants to impose by implementing drastic spending cuts and tax increases to avoid bankruptcy. The protesters shouted “EU, IMF out”.
In Italy, the new Prime Minister, Mario Monti, is also pushing for severe austerity measures to dig the country out of its debt crisis. “Only if we can avoid being seen as the weak link of Europe, can we contribute to European reforms,” said Monti. However, anti-austerity protesters clashed with police today in Milan and Turin.
In Spain, the government was forced to pay the highest borrowing cost since 1997 as the country credit rating is taking a precipitous fall. In France, there is fear that the second largest economy of the EU will be the next one to follow in the tracks of Italy and Spain. Meanwhile, the conflict between the two core partners of the European Union, Germany and France, is rising.
French President Sarkozy is calling for a bigger role of the European Central Bank, while Germany’s Chancellor Merkel is resisting such action. This war of words between Sarkozy and Merkel, if not contained, could turn the financial crisis into a major political one, including a split of the union. On November 14, Merkel said that “Europe is in one of its toughest time, perhaps the toughest hour since World War II.” To make matters worse, on November 16, the head of the IMF European unit, Antonio Borges, submitted his resignation. His department at the IMF oversees the financial bail-outs for Greece, Ireland and Portugal.