di Walter Snyder, Swiss Financial Consulting
One telling criticism of the European Union is that there should first have been a political union before a currency union. Another question is that of the speed of European unification and the acceptance of new members that bring problems with them. Unsettled Balkan states and the prospect of admitting Ukraine into the EU are hardly reassuring.
Given such a background the current long drawn out drama of the Greeks and their debts poses a real quandary. It is surprising that so many different institutions have lent so much to Greece, a country of about ten million Greeks and about one million foreigners with a GDP equal to about 2% of that of the EU. The national debt is about €340 billion, which means about € 34,000 per Greek if one leaves out the foreigners. Not taking into account that the Greeks were not honest when they presented inaccurate economic figures when applying for EU membership, one wonders how some people could have been so foolish to have lent so much to Hellas, alas.
There is absolutely no hope that the Greeks would be able to service such a proportionately huge debt under normal conditions if it is not possible for them to get by with interest rates that are so incredibly low at the present time. In fact, very recently negotiations have been underway in Berlin, and a failure on the part of the Greeks to promise to revamp their impossibly expensive pension system along with other economic reforms could very well result in default and a series of maneuvers on the part of the IMF,ECB and EU to save the situation in extremis. The Greeks are bearing no gifts because they have nothing to give.
The promise of the newly elected British Prime Minister David Cameron to hold a referendum on the EU will probably result in a vote being taken in 2017. He thus has sufficient time to mold public opinion in Britain in favour of the EU and to try to convince Brussels to allow him some small concessions that will be able to be presented to British voters as proof of his tough and successful negotiations with the bureaucrats in Belgium. After all, Britain still has the pound sterling and enjoys great advantages by being in the EU. We do not envision the inhabitants of Britannia choosing to give up such advantages.
The problems facing the EU at present and in the future will certainly be difficult to solve, but it is to be expected that the Europeans will muddle through somehow if they can reform the onerous social welfare system currently in place. Otherwise the old continent will end up being a very poor continent.