Greek Bankruptcy Threat Underlines The Fundamental Problems Of The Euro and EU

While monetary policy for the Euro is centralized, policies concerning state spending and taxation are left to the member states respectively. Here regulations are particularly lax, mostly because European countries are not all that keen on letting an outside body tell them how to run their local governments. This grand divide has created some major problems with concern to economic solvency, and Greece is the shining example of the problems in the current system.

This is why viewing European Union as a single entity is misleading. It is a vain hope that Europe, eternally wracked by a peristaltic pangs of unity and independence, would ever be able to work as a single unit. This daring experiment is now on the verge of failure, thanks to the PIIGS (Portugal, Italy, Ireland, Greece and Spain) and EU’s lack of ability (through purposeful design) to effectively control its newborn currency.

Greece is practically bankrupt. It is one of several countries in the Euro Zone that has ballooning debt, which threatens the stability of not only the European Union, but its prized Euro dollar. Greece’s debt is over four times the limit allowed by the EU. Moves to slash government salaries, hike taxes and raise the retirement age have been met with an uproar in the Mediterranean country, compete with threats of mass strikes. This has sent the Euro on a plunging course, as confidence in the ability of Greece to repay its debts shrinks away to practically nothing.

The economic powerhouses of the EU, like Germany and the Netherlands, are busy trying to figure out what they can do to stave off bankruptcy in Athens. Germany spoke up earlier this week, pledging support for their Greek allies, but coming up short on an actual plan to stabilize the failing state. Polls have shown that the German people are utterly against raising their own taxes so that they can help Greece limp along to solvency. This is coupled with the knowledge that Greece, because of the widespread public panic against cost-cutting measures, might not even meet all stringent terms set forth by the EU in order to receive aid.

Greece is just the first example of how the Euro, and the EU that comes along with it, can ruin an economy of a small nation. The other PIIGS are grappling with serious debt issues as well. How many more states will the prosperous EU nations be able to float before the whole mess tumbles down? The only real way to avoid more collapses is to drastically tighten control over the economies and spending policies of member states, and that will surely be met with resistance.