All Sorts of Things

Random posts on all sorts of things designed to inform and provoke.

Europe: Are Bailout Conditions Actually Helping Recovery?

Unemployment continues to grow in Europe: Spain’s unemployment rate in September grew to almost 26%, Greece’s rate went over 25%, and the overall European unemployment rate was 11.6% – in comparison, the US had an employment rate of 7.8% in the same period. Clearly, these rates are unsustainable, especially for nations who have to hit certain budget targets in order to get the funds they need to start any sort of nascent recovery. Unfortunately, in order to begin that recovery, these countries need their economies to generate consistent revenues which can only happen if their people are able to get jobs; otherwise, these countries won’t be able to pay for their already reduced operations or their growing debt.

The question then is about the intentions of the nations and institutions that are providing funds and imposing conditions on these nations. While I can understand the desire to ensure that the large sums of taxpayer funds that are being delivered to these “underwater” countries are returned with interest, there is a difference between a donors aid and an investor’s investment. Donors do not just give money to get a passable return, they also provide funds to ensure national, regional, and international stability. This stability can only come from economic growth and that growth will not come if donors mandate conditions that destroy a nation’s social fabric. I, as much as anyone, am well aware of the reasons behind the economic slowdown in countries such as Spain, Greece, Portugal, Italy, and France but I have yet to hear a valid argument about how these austerity measures will help economic growth. These conditions are akin to starving someone to cut down on food expense, sure you’ll save money but you’ll also kill the person.

Some of this is quite understandable since, despite its superficial actions and protestations, Europe is not one country but multiple countries with their own interests and agendas. That is the major difference between the European Union (EU) and the United States and, despite the EU’s actions, it does not look like this difference will be overcome anytime soon. One could argue quite legitimitely that the reasons why the US has escaped a Europe-like crisis is because of the dollar (USD) standard and foreign investments. While the former was set up a long time ago and has stood us in good stead, the latter must be continuously maintained and Washington does this by consistently convincing the financial markets that the US remains a viable and safe investment – despite the actions of the US Congress. Unfortunately, the Euro does not have the history of the USD and there is no one credible EU financial entity that can convince international markets to invest in stable European funds. The fact, therefore, seems to be that unless European nations begin to look at themselves as states of one Union, they might as well disband the EU and stop throwing good money on a bad situation and take that poor EU Joe for a meal.

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This entry was posted on November 1, 2012 by in Global Economy, International Affairs and tagged , , , , , , .
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