Europe in the eye of a storm
Wed, May 16, 2012 - 12:00 AM
THIS WEEK, the politics in Greece remains on a roller coaster.
The inconclusive election last week left parties struggling to form a government and there is a power vacuum as the hung parliament is up for grabs.
Yesterday, it was announced that the country was headed for a fresh general election after political leaders failed to agree on a proposal by the president to form a technocratic government with a limited mandate.
The tragedy is that left-leaning parties are in ascendancy all over Europe and things are likely to get worse. The bigger agenda is that the welfare state has become endemic and if left unchecked could trigger a global financial collapse.
The main intention of most parties is to scrap the modalities that Athens had agreed with the donors, especially the International Monetary Fund (IMF) to stave off its economic crisis. The social costs have been staggering but the price is inescapable after years of profligacy.
The danger is that this could plunge Greece back into a renewed phase of economic stagnation if it falls back on its commitments. The bailout deal that has kept Greece floating and saved it from an imminent default is now in danger.
If the left-wing’s manifesto is any criterion, it wants Greece to turn its back on its bailout commitments, inadvertently pitching it into credit default or bankruptcy, and could risk its membership in the Eurozone.
The politicians who had agreed to the terms and conditions of the bailout package would be hard pressed in giving way to the left-wing parties who seem to want to bulldoze the entire arrangement.
Unfortunately, Greece may be drawing some courage from the change of government in France. President Francois Hollande’s victory and anti-austerity drive may be providing ammunition in negating the bailout package irrespective of its negative macroeconomics impact.
Recessionary trends in Europe are there to stay. Credible efforts on the part of respective governments, including the unpopular austerity measures, have made some difference but haven’t solved the economic irritants in the form of sluggish growth and soaring debt burdens.
The situation, as far as prescribing a way out is concerned, is getting quite clumsy as the 27-member European Union is divided sharply on the lines of pro-austerity and pro-spending modules.
With a mere one per cent growth rate estimate, Europe is in the eye of the storm. The economic situation remains fragile, as disparities and lack of consensus loom large. The hype, however, is yet to come as France under its new president pushes on to renegotiate the treaty on budget discipline, with its own set of regulations.
Whatever happens in trying to form a stable government in Greece, the spectre of a united Europe is now history as most governments will experience some form of upheaval in the face of inevitable austerity after decades of state welfare.
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