As Greek Drama Plays Out, Where Is Europe?

[TomCADem]

Source: NY Times

WASHINGTON — With new European Union leaders practically invisible and some national leaders acting largely for domestic political reasons, the burden of shaping a rapid and credible restructuring program for Greece has fallen primarily to the International Monetary Fund — exactly where proud European Union leaders had insisted it should not be.

Once again — as during the 2008 financial crisis and the more recent halt in European air traffic due to volcanic ash — European leaders have failed to surmount national interests and cobble together a coherent policy quickly enough to address a problem. In the process, they may have done permanent damage to the credibility of the European Union.

“There is no doubt that the European project has suffered structural damage from this,” said Jacob Kirkegaard, a research fellow in European affairs and structural reform at the Peterson Institute for International Economics here. “It’s clear that the I.M.F. is the last man standing and is structuring the program.”

Criticism is rising about the competence of European leaders, which has worsened the plight of all the countries in the euro zone.

Read more: http://www.nytimes.com/2010/04/30/world/europe/30europe.html

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I am really surprised that EU officials are just standing pat while one of their members heads towards insolvency, and relying on the IMF for help. Now the entire EU is seen as unstable. Where is the Union in the EU?

[LakeSamish706]

1. Sorry, but I think the more important question is when have you ever seen

the EU do anything without the US telling them that it was alright to do it? I know that I have criticized our Government, but Europe and most of the rest of the world does nothing about anything unless it directly affects them.

[naaman fletcher]

2. Germany is being a good parent...

Telling their irresponsible kid that there will be no bailout unless he changes his ways. Most parents have been here before.

[TomCADem]

6. More Like A Case Of Infanticide - Single Currency Magnifies Problems

Paul Krugman explains how Germany helped fuel inflation throughout Europe, and how a single curreny hamstrings the ability of individual European countries to recover.

http://www.nytimes.com/2010/02/15/opinion/15krugman.html

But with its warm weather and beaches, Spain was also the Florida of Europe — and like Florida, it experienced a huge housing boom. The financing for this boom came largely from outside the country: there were giant inflows of capital from the rest of Europe, Germany in particular.

The result was rapid growth combined with significant inflation: between 2000 and 2008, the prices of goods and services produced in Spain rose by 35 percent, compared with a rise of only 10 percent in Germany. Thanks to rising costs, Spanish exports became increasingly uncompetitive, but job growth stayed strong thanks to the housing boom.

Then the bubble burst. Spanish unemployment soared, and the budget went into deep deficit. But the flood of red ink — which was caused partly by the way the slump depressed revenues and partly by emergency spending to limit the slump’s human costs — was a result, not a cause, of Spain’s problems.

And there’s not much that Spain’s government can do to make things better. The nation’s core economic problem is that costs and prices have gotten out of line with those in the rest of Europe. If Spain still had its old currency, the peseta, it could remedy that problem quickly through devaluation — by, say, reducing the value of a peseta by 20 percent against other European currencies. But Spain no longer has its own money, which means that it can regain competitiveness only through a slow, grinding process of deflation.

[naaman fletcher]

7. A good point..., thanks. nt.

[DJ13]

3. I think many EU nations are themselves secretly in trouble

They arent acting like a union thats economically strong enough to keep the union together at this point.

[Lucky Luciano]

4. Read a report today that bailing out all the PIGS will run about $764B

now that Greece is up to $160B. Of course, bailing out Greece requires cooperation from the rest of the EU - though Italy, Spain, Portugal, and Ireland are probably already too levered themselves to participate...so Germany will have to chip in for them too...Just a total mess.

[liberation]

5. Yeah, how dare the EU not rush to pay up for toxic debt packages no questions asked. No?

Merkel et al are burning serious amounts of midnight oil. This is a very big mess, and the clean up is going to be epic.

Just because you no where near the woods, it don't meant the tree didn't make noise when it hit the ground.

[Cleita]

8. I was watching Al Jazeera tonight and their story was about

Germany needing to step up to the plate alongside the rest of the EU to help out Greece, otherwise the Euro would be devaluated.

:shrug:

[JCMach1]

9. Hell, the banks sitting on piles of dollars borrowed from the FED at close to 0%

are counting on it.