The disparaging moniker “capitalist pigs” is alive and well frequently invoked by those angry at the “corporate fat cats” (a newer slight) who seem responsible for a laundry list of economic woes. Yet for Europeans a more pertinent insult these days is “socialist pigs.” The PIGS of Europe today or PIIGS are Portugal Ireland Greece and Spain. (Italy is a veteran debtor in Europe so its inclusion in the acronym is optional.) These countries are the most dangerously indebted national economies using the euro and thus comprise the first major threat to the decade-old “eurozone.”
The 16 nations of the European Union that constitute the eurozone have agreed to follow certain fiscal rules so they can collectively determine monetary policy. This means that each member country retains national freedom regarding how they spend and lend within limits but all countries are bound to the same decisions about the collective currency— the euro.
Each of the PIGS presents unique problems to the eurozone but Greece is presently the most dire case. As the United States balloons its own national debt on bailouts stimulus packages and health care reform we should look to Europe not for more ideas on how to spend but as a warning that living beyond one’s means is unsustainable. Examining Greece’s plight will also lend some insight into the larger problems at hand in European politics.
Greece not the richest country in Europe received an early (Orthodox) Christmas present Jan. 1 2001— a new credit history. Or at least that is how the nation treated the advent of the euro. Since then the Greek government has engaged in reckless spending bloating the size of its government and national debt. According to the BBC the gross national debt of the nation is now about 125 percent of its gross domestic product. This number may seem preposterous but this figure was at 86 percent for the United States in 2009 according to the Congressional Budget Office.
The eurozone didn’t (and really still doesn’t) have any way to deal with Greece’s great debt because numbers that big aren’t supposed to be possible. Greece while definitively socialist tore a page from the playbook of so many capitalist pigs and then burned that page along with many of its books. So for many years while Greece’s debt was mounting and indeed exceeding the limits allowed by the eurozone only part of it was known to the global market. Once word got out the value of the euro and Greece’s standing with its fellow eurozone nations took a dive.
Now the wealthier and more fiscally responsible countries in the eurozone (The two aren’t synonymous. Spain is the fifth largest economy in the EU and only in a little less trouble than Greece.) had to act. The money they had worked so hard to earn and had been conservative about spending so as to keep its value high was now growing less valuable with each passing week. And whom would this exigent time call on for solidarity? None other than France and Germany.
For awhile there were talks especially in Germany of booting Greece out of the eurozone. After all not only did it break the rules but added insult to injury making other countries pick up the tab. Some thought to excommunicate all the PIGS and boost the euro back up in the currency markets to rest high atop the backs of more fiscally responsible nations. This however would have been a very chilly political move. But on the other hand how would Texas which is running a surplus right now feel if it had to help bail out the foundering state of California?
Essentially Germany didn’t want to have to bear Greece’s burden at all and if it had to it didn’t want the eurozone to do it alone. But Germany wasn’t the only one talking. France insisted that the eurozone countries take sole responsibility for bailing out Greece. This insistence was backed by French belief that to bolster the euro the eurozone would have to show that it was fully capable of keeping itself afloat. Involving any outside help would not only humiliate the group but ultimately hurt the euro too.
Compromise was reached and a deal was announced that should Greece default— which it has not yet— the other eurozone countries and the International Monetary Fund (IMF) could offer up to €22 billion. Since the IMF holds all its recipients to extremely stringent standards the eurozone would no longer be alone in impelling Greece to become fiscally responsible should this bailout become necessary. In the meantime everyone is hoping the announcement alone will be enough to restore international faith in the Greek economy. Nevertheless one wonders if the assistance shouldn’t be offered in U.S. dollars instead. At least for now the world market still values American dollars as the most valuable asset there is. Since the beginning of this year the dollar has gained nearly 10 percent against the euro making it a good time for Americans to travel to Europe and many money-minded citizens proud to be Americans once again.
