The debt crisis within Europe could be traced back since common economic parameters to be inside the Eurozone fixed in Maastricht during by 1992.
The famous Maastricht parameters brought along a set of country’s public debt index which couldn’t stand out of the public finance interdependence created by the adoption of euro as official currency of 12 nations. The economic primacy was obviously the bedrock of European Union as international organization.
The starter base of Euro introduction showed a solidly budget deficit of the countries – all countries satisfied margin of 3% of GPD – but some of them – Italy end Belgium on the top – swan into a deep high government sovereign – debt.
For ten years a merger among strict balance control of public finances and reform mechanism of economic system into each country run throughout growing phase of global economy.
But suddenly, in 2008 the financial crisis started in U.S. curbing the economic expansion. First of all the banking system had been striking and in few mounts all other private sector have been bashing. Consequently, the reduction of national wage ends up.
Some governments didn’t come to grips with this international troubling atmosphere likewise some other reacted immediately pushing ahead important, sometimes unpopular, domestic economic reform and strict fiscal policy.
Nowadays, the scenario is gloomy for someone, thriving for somewhat and no gain no pain for some others.There is no bandwagon and no exit (maybe really painful exit) in this delicate situation, there are only rules which should be followed trying to avoid the breaking – up of the Eurozone system or better the entire Schengen Area.
Doubtless, Ireland and Greece are in the first group. Basically, they are the only two profiteers so far of loan and diktat which have been given by Trojka – the European Commission, the European Central Bank and International Monetary Fund. A trillion – dollar loan fund have been put on the balance for saving euro.
Last may, euro 110 billion was spent for the Greek rescue trying to encircle his into state bankruptcy. For at least one year the Greek government presented to the European Commission fake budget result. Instead to be into the 5% the Greek budget deficit has been revised around 15,4%. The conditions of loan were clear, savage cuts to public investments.
In November came into the time of Ireland bail – out. The banking system collapsed. To restore the faith of foreign investors the Trojka made one injection of euro 85 billion. The conditions, even in this case, were clear. To the Ireland government was asked structural reform of country’s financial regulators and austere budget. The diktat didn’t touch the highly competitive 12,5% tax rate on corporate benefits booster of foreign direct investments.
Countries as Spain and Portugal have been hit by the crisis and for that to regain competitiveness, stimulate competition and enhance enterprises need structural reform.
Likewise, Italy affected a slow growing needs a structural reform even if the banking system is solidly capitalised and could sustain the impact of the crisis.
Sudden crisis may be soon match again. To avoid that the Eurosystem countries are trying to fix plan. First plan was made by Germany, the biggest European economy, which asked for a revision of the Lisbon Treaty. The debate over this revision was towards a inclusion of another independence institution – the European Bail – out Fund – into European Union.
This fund could help trouble countries by giving independence control of public finance and possible rescue. This was a Berlin attempt for trying to share the burden of sovereign debt by building a independence fund where all countries are jointed sharing the same responsibilities. Not so possible considering the long revision procedure of the treaty and the high consesus reclaimed.
Secondly, Financial Ministers as Mr. Juncker (Luxembourg) and Mr. Tremonti (Italy) pushed forward for sharing a entire European debt. The keyword was Eurobond or rather linking the bond yields issuing European bonds. A sort of sovereign – debt joint venture. Ambitious plain backed overall by Mr. Tremonti considering that the Italy has one of the highest sovereign debt of Eurosystem.
Another plan backed by IMF include a restructuring of debt of the trouble countries. But currently this is not so practicable cause the lack of will to introduce structural reform in this way.
The last but not the least is the France – Germany purpose to sign a Pact of Competitiveness. The idea is to build a common fiscal system starting, for instances, to pension age and arriving to index – linked wage maybe even adopting a constitutional or other domestic legal “debt brake”. In summary, that means to control as closest as they can the trouble countries.
Probably, this is the seed of Merkel – Sarkozy Axis to enhance the European Union integration. How this can be succeed is so difficult to forcast. Bad answers is coming. Ireland rejected the idea of aligning EU corporate taxes. Belgium doesn’t want abolish his system of index – linked wages. Poland denounced plans to separate summits of euro – zone leaders for being divisive.
From Stettin to Trieste, many Easterners feel, a curtain is descending again. This time it bear the symbol of the Euro. The union within the union, 17 – plus, Euro A and Euro B, who knows which is the destiny. It’s a maze, maze well – done with no easy way out.