‘Ten days to save the world’ as Euro leaders meet
The world's largest economy, the EU, is on the brink. Greece and other poorer nations can't pay their debts. Voters are angry. Banks are weak. And leaders can't agree what to do.
It is seldom that world leaders agree about priorities – today is one of those rare moments. Not just the headlines but also the urgent attention of US President Barack Obama, Chinese Premier Wen Jiabao and dozens of other prime ministers and presidents from the UK and Germany to Brazil and Japan are focused on one crisis: the European single currency. ‘Ten days to save the world’ just about sums up the mood.
Yesterday the leaders of the 27 European Union countries met in Brussels to try and agree a plan. The day before that, their finance ministers had provisionally settled that European banks needed extra reserves of 100 billion Euros. Another meeting of leaders is now planned for Wednesday. Next week the leaders of the G20 – the world’s 20 most powerful economies – meet in France: hence the warning from senior American politicians about ten days to find a solution that will prevent another world recession. By then, there must be a rescue deal for Greece, now rapidly sinking under its debts and threatening to trigger a domino-like collapse of Europe’s weaker economies.
What’s at stake? In short, much more than most people realise. Europe overtook the USA as the world’s largest economy four years ago. It is twice as big as China’s and nearly four times the size of Japan’s. Poorer countries from Africa, South America and Asia depend upon European companies and markets. Commercial ties between Europe and the US are the largest in the world. So if Europe hits the rocks, the world suffers. Millions of people’s jobs, incomes, safety and health are at risk.
The crisis in Europe has a simple cause: governments of less prosperous countries like Greece borrowed too much over the years and the banks in rich countries like France and Germany lent them too much. Now Greece can’t pay its debts and the banks can’t afford their losses. The nightmare is that Greece goes bankrupt, followed by other vulnerable economies such as Portugal, Spain, Ireland, which has already gone through one debt crisis, and even Italy. If at the same time one weak bank goes bankrupt, it could be followed by a chain of others. The largest economy would be plunged into long years of decline, dragging down the rest of the world with it.
Economics or politics?
The European crisis raises an overwhelming question: is it politics or economics that decides? Many believe it is economics. They say the crisis will be solved ‘because it has to be’. Europe has wealth and a solid economic system. There’s too much too lose by failing.
Others, however, say that this is a political crisis, based on the acquisition and application of power. Still traumatised by memories of 1923 when one glass of beer cost four billion marks, Germany fears inflation. It insists governments must keep inflation low by cutting borrowing and raising taxes. But this has stunted growth, making debt worse. And there’s nobody who speaks for Europe as a whole. A powerful club of nations, chiefly Germany and France, provides leadership but when they can’t agree, nothing happens. If politics really decides the future, the crisis may get much worse before it gets any better.
- If you had to pick just one, do you think money or power is the most powerful tool?
- Can you have an economic entity like Europe, with one currency and one market, running in tandem with 27 independent democracies?
- Imagine you are a poor farmer in India whose income comes from exporting mangoes to shops in Europe. Write a letter to the president of the European Commission explaining what will happen if you can't sell your crop next year.
- Read some of the links below and then write down three reasons why Greeks should suffer for getting into debt, and three reasons why they not suffer but should be rescued by richer European countries. Debate your findings.
Some People Say...
“Without a powerful single leader, Europe will never work.”
What do you think?
Q & A
- Why does the European Union exist anyway?
- Largely as a response to two World Wars that scarred the first half of the 20th Century. European leaders vowed it would never happen again so they created the EU as a model of co-operation and peace.
- What is the vision?
- For internationalists everywhere, for believers in much deeper co-operation between nations, for those pushing for the establishment of an international legal order, the EU is a beacon of hope.
- And what are the rival ideas that might replace this vision?
- The primacy of power over law, the enduring supremacy of the nation state and authoritarianism.
- a major world currency that came into being on 1 January 1999 as part of a project to create economic and monetary union among all member states of the European Union. Today there are 27 members of the EU but only 17 of them have adopted the Euro. They are referred to as members of the 'Eurozone'.
- The capital of Belgium and also the headquarters of the European Union. When people say 'Brussels' nowadays they usually mean 'the European Union'.
- Here the word refers to the Reichsmark, which was the official currency of Germany from 1924 until 1948. The Deutschmark then replaced it, from 1948 to 2002 when Germany adopted the Euro.