The leaking bailout life raft
So, as we continue to ponder the possible demise of Greece, we keep hearing increasingly urgent voices saying that the clouds are gathering over Italy, and this just days after Spain?s troubles were apparently taken care of. How were they taken care of? By the Mediterranean country, a force in Europe, acting on the exact measures that its leadership had rejected less than a week earlier and which appear not to have the support of the people: signing up for a bailout program. This bailout package has been granted on the condition that it is applied exclusively to banks, as Spain?s unemployment rate of 25 percent is clearly not seen as such a big deal. Now that Europe?s laggards have all been included in the grand economic experiment, the verbose international markets have realized that the eurozone?s woes are spreading. With winter already having descended permanently over Portugal, Ireland, Greece and Spain, the clouds are now gathering over Italy as well.
You don?t need a crystal ball to see that Italy?s time is nigh, regardless of whether the government of technocrat Mario Monti is hailed as a paradigm for other sufferers or that its policies are seen as models for development, unfettered as they are by counterproductive details such as legitimacy, consensus or constitutionality.
Portugal was also hailed as a model of healthy adaptability and political unity, and Ireland received much praise as a country where reason led the way, in contrast to Greece, which has been cast as slightly loony. But these countries all have one thing in common: austerity, austerity, austerity. Austerity that is unilaterally imposed (and by definition unfair), that is constantly getting worse and that is also ineffective, leading to recession, recession, recession.
On top of that, the self-fulfilling prophecies are coming true: those of the markets, which predicted that no good would come of so many measures (and by doing so have contributed to their failure), and have gone on to cut countries? ratings, raise interest rates and exhaust their borrowers. The borrowers, in turn, become convinced that there is no hope and so they grab onto the leaking bailout life raft, which perpetuates the recession, hits revenues even harder, multiplies the ranks of the unemployed and fragments societies into warring parts.
Eurogroup Chairman Jean-Claude Juncker recently described the austerity imposed on nations like Greece as being unfair and ineffectual. Hopefully Angela Merkel was listening.