The growing debt crisis in Europe is straining the monetary union and even the European Union itself. Europe has arrived at a crossroads. Which way will it turn?
A European state is being created before our eyes." So wrote international business editor Ambrose Evans-Pritchard in London's Sunday Telegraph. "The walls of fiscal and economic sovereignty are being breached" ("Europe Prepares Nuclear Response to Save Monetary Union," May 9, 2010).
For weeks the choice was becoming clear for the countries of the eurozone: Either integrate or disintegrate. Greater integration has been chosen as the more financially disciplined nations of the European Union bail out the PIIGS—five nations (Portugal, Ireland, Italy, Greece and Spain) whose excessive spending and serious indebtedness have threatened the future stability of the world's number two reserve currency, the euro.
At a time when many commentators have observed that the Obama administration certainly appears to be disinterested in Europe, convinced that Asia is more important to U.S. interests, developments in Europe threaten the stability and prosperity of the western world. This doesn't seem like a good time for Washington to turn its back on Europe.
"Amid cries of outrage and expressions of disbelief, a new age of austerity has arrived in Europe," wrote Victor Mallet in the Financial Times. "As governments across the eurozone impose cuts on a scale unseen in decades, Greece—widely seen as the epicentre of the crisis—has already seen violent demonstrations and general strikes. Now there is growing concern that such displays of public anger will become more widespread" ("Europe Enters Era of Belt-Tightening," May 14, 2010).
Right across Europe, governments are imposing strict austerity measures. David Cameron's first act as Britain's new prime minister was to cut ministerial pay by 5 percent, a decision widely expected to precede a similar cut across the board for all government workers.
A global effect
The fact is that governments everywhere have been over-spending. This has been going on increasingly for decades. Now the final day of reckoning seems to have arrived and not just in Europe. The United States, according to the latest IMF figures, is one of the biggest offenders, with both the federal government and individual states responsible.
Globally, Greece, Italy, the United States, Belgium and the United Kingdom are listed as the countries headed for the highest debt-to-GDP ratios. The United States is widely expected to follow in European countries' financial footsteps as the international debt crisis worsens and spreads. In the United Kingdom, predictions are that the new government will have to impose the severest austerity measures in living memory, paying a heavy price for the profligacy of its predecessor.
"The shock is palpable in countries which have moved from poverty to prosperity during the decades of almost uninterrupted growth since the second world war and have always enjoyed the material benefits of EU membership," continues the Financial Times.
"For the first time since EU aid started flowing freely in the 1980s, Greeks face a significant drop in living standards, with the economy set to shrink by 4 per cent this year and another 2.6 per cent in 2011." This is in spite of a bailout from the EU and IMF that totaled a staggering $955 billion.
"The new reality imposed by the Greek Socialist government—a 12 per cent wage cut for civil servants, reductions in pensions and looming job losses in public sector corporations—has stunned workers in the bloated state sector" (ibid.).
On May 14, Ambrose Evans-Pritchard wrote another article for the London Daily Telegraph. Its title, "Europe's Fiscal Fascism Brings British Withdrawal Ever Closer," evoked memories of events over 70 years ago, fresh on peoples' minds as Great Britain commemorates the 70th anniversary of the Battle of Britain, in May 1940. The article began with these words: "Just when you thought the EU could not go any further down the road towards authoritarian excess, it gets worse."
Evans-Pritchard warns of the consequences of the latest developments on the sovereignty of the 27 nations that comprise the European Union. It's not only the 16 countries of the eurozone that are going to be affected by the changes.
An economic government
"The European Commission is calling for EU powers to vet budgets of the 27 member states before the draft laws have been presented to the House of Commons, the Tweede Kamer, the Folketing, the Bundestag, the Assemblee Nationale, or other national parliaments. It applies to Britain even though we are not in EMU [European Monetary Union—the eurozone].
"Fonctionnaires and EU finance ministers will pass judgement on the British (or Dutch, or Danish, or French) budgets before the elected bodies of these ancient and sovereign nations have seen the proposals. Did we not fight the English Civil War and kill a king over such a prerogative?
"Yet again we are discovering the trick played on our democracies by Europe's insiders when they charged ahead with EMU, brushing aside warnings by their own staff economists that monetary union was unworkable without fiscal union. Jacques Delors knew perfectly well that this would lead inevitably to a crisis, but it would be the 'beneficial crisis' that would force sovereign parliaments to submit to demands that they would never otherwise accept.
"This is now playing out before our eyes. Club Med governments have built up 7 trillion euro sovereign debt under the cover of monetary union, which shut down the warning signals for borrowers and creditors alike. We are now near—or beyond—the point of no return. Eurozone states must go along with this cynical entrapment, or risk economic catastrophe. The conspirators have succeeded. The 750 billion euro shock and awe package agreed over the weekend clearly alters the character of the European Project, crossing the line towards an EU debt union and an EU Treasury. How long will it be now before the EU acquires direct tax-raising powers?
"As French president Nicolas Sarkozy said: 'We have a veritable economic government.'"
Led by the French president, who has a reputation for being a man of action, the European Union has just taken a major step toward the "ever closer union" the six original member countries pledged themselves to in 1957 when they signed the Treaty of Rome.
However, as Evans-Pritchard shows in his article, "withdrawal" is also a possibility, as some countries may not want to lose their fiscal independence. Although the Treaty of Rome does not allow for withdrawal by member states, it does not mean that it could not happen. It is also possible that countries could be expelled if they don't submit to the fiscal restraints imposed on them by the European Commission.
With this in mind, the new government in the United Kingdom is particularly interesting. For the first time since World War II, Britain has a coalition government, since no one party got the necessary votes to form a government by itself. The coalition is dominated by the Conservative Party of Prime Minister David Cameron, in coalition with the third biggest party in the country, the Liberal Democrats. Ironically, while the latter is the country's biggest supporter of the European Union, the Conservatives are the opposite, resisting any further attempts to more closely integrate the European nations.
Hence, Evans-Pritchard writes that recent events bring "British withdrawal ever closer." As if to emphasize the growing rift with the continent, the UK's new Foreign Secretary, William Hague, flew to Washington D.C. for consultations with what the BBC described as "Britain's foremost ally" (BBC America news, May 13, 2010).
Prophesied events
The recent developments described above have prompted Bible students to ask how the 27-member European Union will become the 10-nation revival of the Roman Empire prophesied in Revelation 17 and the final superpower predicted to lead directly into the second coming of Jesus Christ.
"The ten horns which you saw are ten kings who have received no kingdom as yet, but they receive authority for one hour [symbolically, a short time] as kings with the beast… These will make war with the Lamb, and the Lamb will overcome them, for He is Lord of lords and King of kings." (Revelation 17:12,14).
While this may not be the time for the fulfillment of the end time prophecies relating to Europe, it certainly could be. The modern day Greek tragedy has plunged Europe into economic turmoil. By trying to save the 10-year-old Euro currency, the continent is going to go through severe austerity.
Some of the economically weaker nations of the European Union may decide they can do better on their own, opting for their own national currency that they can then devalue to boost exports and jobs. This would also enable them to control their own interest rates. The disadvantage is that they could lose access to the world's biggest single market, the European Union.
Interestingly, in the midst of the crisis, Estonia announced it has now qualified to join the Euro and will become a full member next year. Clearly, many are very committed to a monetary union.
But a prolonged period of austerity could be very risky, as European history has shown. This article began with a quote from Ambrose Evans-Pritchard. At the end of the same article, he concludes with the following words: "Stephen Lewis from Monument Securities says Europe's leaders have forgotten the lesson of the 'Gold Bloc' in the second phase of the Great Depression, when a reactionary and over-proud Continent ground itself into slump by clinging to deflationary totemism long after the circumstances had rendered this policy suicidal. We all know how it ended."
It ended with the collapse of democracy, the rise of national socialism (fascism) and World War II.
Europe and the euro have come to a crossroads. For the euro to continue to work in so many different countries, the diverse group of member states must all have coordinated fiscal policies. One solution might be for the various nations to agree that there should be absolutely no over-spending, that they must all live within their means. If this does not happen, any solution now is likely to be temporary, with a further and greater euro crisis in the future.
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