Global News Journal
Beyond the World news headlines
Whichever way you look at it, Germany is in a bit of a quandry.
For the past 11 years, since the launch of the euro single currency, Europe’s biggest economy has enjoyed steady current account surpluses as it has exported its manufactured goods around the world, while keeping labour costs down and productivity steady at home.
Its economic growth may not have been stunning in recent years, but it has experienced none of the huge budget-deficit and debt problems of its euro zone partners, particularly those in southern Europe such as Spain, Greece, Portugal and Italy. And it has none of the nagging competitiveness issues that all those countries also face.
Essentially it has a modern, open economy and has pursued steady, prudent economic management.
So when Greece’s debt crisis exploded — leaving the euro zone with effectively three choices: have Greece leave the euro, let Greece default, or bail Greece out — Germany was none too thrilled about any of them. Least of all, though, did it want to bail Greece out, believing that it wasn’t up to hard-working German taxpayers to pay off Greece’s debts when the country had spent the best part of a decade spending at will and doing nothing to overhaul its economy.
Who do you call when you want to speak to Europe? The question, long attributed to Henry Kissinger, has yet to be answered convincingly by the 27-country European Union.
Six months ago, European Commission President Jose Manuel Barroso told a news conference the person to call on foreign policy issues was Catherine Ashton, who had just been chosen as the European Union’s foreign affairs chief. The “so-called Kissinger issue is now solved”, he said.
Most people would agree that the European Union and the euro single currency are part of a grand political and economic vision. But at times they are also a bit of a numbers game.
As Greece has shown with its less-than-reliable economic statistics, numbers can be fiddled to get budget deficits and debts down and meet the criteria to join the euro.
Never let it be said that the European Union doesn’t get things done.
It may have a slightly maddening way of going about it — last-minute, late-night summits, hours and hours of sweaty, closed-door negotiation, multiple conflicting plans put forward by the likes of the Finns, the Italians and, who knows, the Estonians – and then, hey presto, like the proverbial rabbit out of a hat, at 2 in the morning, a $1 trillion deal to haul the world back from the debt-crisis abyss. All in the name of European unity.
As one Brussels policy analyst put it somewhat delphically : “The EU is not crisis resistant, but perhaps it is crisis proof.”
Credit rating agencies cannot win.
They were blamed for carelessness before the crisis, handing out over-generous ratings on the packets of mortgage-backed securities that subsequently unravelled, sending the global economy into a spin and leading to Lehman Brothers collapse. Now they are being criticised again, this time for being too cautious, by dishing out rating downgrades to countries in Europe being sucked into Greece’s debt crisis.
Standard & Poor’s recently downgraded Spain’s rating one notch to AA, warning that the outlook was bleak for the euro zone’s fourth biggest economy. Struggling Greece has also been marked down — to junk status — and now hovers close to Pakistan and Venezuela in the credit stakes. Portugal is another country to be singled out for downgrades from the leading ratings companies.
Greece and the euro zone are still very much in the midst of a debt and deficit storm, with not just Athens but possibly Portugal and Spain at risk of being swept up in the maelstrom.
But that hasn’t stopped economists and political analysts looking for a silver lining in this unprecedented meltdown.
I am not a Eurosceptic, but you do sometimes question whether the billions of euros European taxpayers’ dole out each year to the European Union — and specifically the European Parliament – is always money well spent.
Those doubts came freshly to mind on Tuesday during the presentation of the European Central Bank’s annual report to the parliament’s Committee on Economic and Monetary Affairs.
All institutions have their gibberish and jargon, but the European Union really does take the biscuit sometimes.
Whether it’s endless acronyms that tumble out of press officers’ mouths without the faintest irony, or stock phrases that ministers, commissioners and assorted lower-level officials just can’t stop themselves from using, the EU and its institutions have given rise to a plethora of empty or confusing verbiage.
After five months of struggling to stay afloat in the quicksand of a debt crisis, Greece has finally asked the European Union and the IMF to throw it a lifeline.
Some might think that’s the end of it — Greece now has access to up to 45 billion euros in special funds, it can finance its deficit and refinance its debts at better rates, and speculators (who have metaphorically been stepping on Greece’s head while it thrashes around in the quicksand) have to beat a retreat.