This has been a busy week in the European Union (EU), as the German parliament was set to vote for an increase in its contribution for bailout funds last Wednesday. The reality is that across the Atlantic, prospects are looking extremely gloomy. The Eurozone economic crisis is reaching a decisive turning point.
Since Greece’s sovereign debt crisis was revealed in 2009, the European countries have bailed out the Mediterranean country twice, but with no noticeable improvement. The same can be said of other crisis-stricken countries, such as Portugal and Ireland, who have been unable to effectively re-spark their economies into motion despite the enormous bailout packages they were issued. This, coupled with investors who believe there is far too much debt swirling about in the Eurozone area and with many certain that a Greek default is inevitable, decisive action is needed.
Europe’s strongest economy, Germany, has taken the lead in solving the issue. Having been at the forefront of the major European bailouts, the German parliament has just approved a bill that will increase its contribution to the European Financial Stability Fund (EFSF), and create a larger bailout fund. The rest of the European countries have still to approve these measures. The question is: will larger bailouts be the answer for the spiraling European economies?
A bail-out might not be the complete solution, but it is definitely a big part of it. Without this liquidity influx, it is impossible for weakened nations to restore their cycle of profit; this time though, a strict eye has to be kept to ensure the proper completion of the policies outlined by the borrowing countries. Greece’s default would be a major hit to the Euro, and one that would definitely undermine its legitimacy, involving reduction, restructuring and increased uncertainty of debt payment. So now, more than ever, Europe needs to honor their “Union” status and create a more substantial bail-out fund, as well as a more centralized European economic and fiscal policy.
Now, these measures of bailouts and austerity bring many downsides, especially to the citizens of Greece, whose forced impoverishment by its government to honor Greek debt seems all but fair. But to this I say: focus on long-term gain rather than short-term gratification; we are much too used to basking in immediate returns, rather than in long-term economic stability.
This is without a doubt Europe’s biggest challenge yet, and even more so a test of strength for the EU. The question remains: will the crisis unite Europe beyond its economic differences and help build a stronger, more unified block, or will it destroy it completely?