Amado Lorenzo´s analysis (read
Euro vs Local currencies
) is quite deep and revealing and I will only attempt to put in a nutshell a few truisms from another rational perspective.
The Euro crisis is a matter of greed and irresponsibility on the part of populist governments. They managed to remain in power leaning on wasteful policies for their constituents to have an easy life beyond their means. While they were able to borrow more and more, every body was happy and they kept winning elections.
However, they do not want to pay now their debt. Their people do not want austerity measures either. They are ready to default with no remorse for those losing their money invested in their squanderous public debt. Not only that, they further demand more funds to keep their illgotten standard of living.
The fact is that if you spend more than you can pay, you get in trouble. This is true for individuals as well as for whole countries. And when you get in financial trouble you cannot expect to maintain your easy life. You must make sacrifices.
Some irresponsible people get loans from their friends at a rate well above their financial possibilities. Their friends, as well as the banks, expect them to pay back their debt. That is what was expected from countries such as Greece, Spain, Portugal and Ireland when they entered the Euro zone with a promise to play by the rules. Their European friends believed in them and gave them a hand. Not just a hand, but a lot of money! The borrowers were expected to make an effort to have a more productive economy that would gain a rightful share of the richest market in the whole world. What they did was to take advantage of their friends and what they are doing now is to complain because those friends are reluctant to give them more!
The present situation is called "the European sovereign debt crisis". Technically, it has resulted from a combination of complex factors, including the globalization of finance; easy credit conditions during the 2002–2008 period that encouraged high-risk lending and borrowing practices; international trade imbalances because of lower productivity and less competitiveness; real-estate bubbles resulting from speculative greed that have since burst, giving way to slow economic growth in 2008 and thereafter; populist fiscal policy choices related to government revenues and expenses; and approaches used by nations to bailout troubled banking industries and private bondholders, assuming private debt burdens or socializing losses.
The problem is that the more affluent European friends of these defaulting countries are also in trouble, because they are losing money too in the midst of this recession. They are not asking too much, just a reasonable expectation that Greece, for example, curbs its 2012 deficit to 5.3%. They expect similar commitments, according to their particular cases, from Spain, Portugal and Italy. At least Italy and Spain made an effort during the last 20 years to build competitive industrial sectors, a functioning public administration and some sort of political understanding about national responsibilities. Greece did not attempt much of this. And they do not want to suffer now the consequences of their acts. They are asking for a free lunch.
The easy way out for the European community is to expell Greece from the Euro zone. They deceived EU officials with retouched accounts obscured by complex derivatives and they do not deserve to share Europe's future until they put some order in their own country. The Spanish government and the Spanish people should also be aware of their own responsibilities before it is too late.
Topic Author
