The latest economic crisis to arise is that of Greece, a profligate country that has squandered its resources and is now reduced to holding a begging bowl for a financial bail out. Were it just Greece that suffers, one could shrug it off and leave it to the Greeks to sort out. The problem is that Greece is a member state of the EU, and of the EMU, the European Monetary Union, comprised of 16 countries that employ the Euro currency. Thus, the economy of each member state redounds not only upon the other states, but globally. The supposed deficit maximum for all member states is 3% but Greece’s deficit has ballooned to 13%! “Greece’s budget gap, which its previous government originally forecast would be 3.7 percent in 2009, was largely the result of “an insufficient response” by Greek authorities as well as expenditure overruns, the commission said. Economic statistics provided by Greece “were completely wrong,”
That, alas, is not the only delinquent country. Greece is only one of the infamous PIIGS countries – Portugal, Ireland, Italy, Greece and Spain – all of which have exceeded the theoretical 3% deficit limit. Other countries, even major economies as France and the UK are on the cusp of surpassing the same limit. The UK, once a leading economy in Europe and the world, although not a member of the EMU Eurozone, now has a Debt to GDP ratio of 456%! Worse, there is now talk of the imminent collapse of Sterling. The 3% deficit limit has become a joke. There is no fiscal discipline, just empty threats to punish the delinquent nations, and because of the fear of a domino effect, no punishment, instead, bail outs.
What happened to the dream of creating a major economic union to rival the world’s leading economy, the United States?
The answer is ‘o’er leaping ambitions’.
The EU began with a core of six countries in 1957, comprised at that time of the major powers in Europe: Belgium, France, Italy Luxembourg, the Netherlands, West Germany – and expanded shortly thereafter to include the UK, Denmark and Ireland. All well and good, but then the rot set in. The EU, in an unseemly rush to incorporate other countries and expand its influence and economic clout, began willy nilly to admit country markets with economies and political cultures incompatible with the core structure. In the 1980s came Greece, Spain and Portugal, and, after the fall of the wall, a veritable flood of new admissions from underdeveloped nations from East Europe. The current membership now numbers 27 countries with another eight awaiting admission: Croatia, Macedonia, Turkey, Albania, Bosnia and Herzegovina, Montenegro, Serbia, and Iceland. Iceland? Yes, Iceland, which has just suffered the collapse of three banks and a financial meltdown.
As more countries with even more disparate cultures and economies are added, the greater the risk of collapse of the EU and the Euro.
As much as China is pilloried for currency manipulation, and authoritarianism by the vaunted free market countries of Europe and the United States it has the healthiest economy in the world. In terms of both Public and External Debt China ranks well below the US and major European economies
Public Debt http://en.wikipedia.org/wiki/List_of_countries_by_public_debt
External Debt http://en.wikipedia.org/wiki/List_of_countries_by_external_debt
Debt to GDP Ratio
Even more impressive is China’s Debt to GDP Ratio, 5% against USA 84%, Germany 155%, France 210%.