They are called the PIGS -- Portugal, Ireland, Greece,
Spain. What they have in common is that all are facing
deficits and debts that could bring on national defaults
and break up the European Union.
What brought the PIGS to the edge of the abyss?
All are neo-socialist states that provide welfare for poor
people, generous unemployment, universal health care,
early retirement and comfortable pensions. Most consume
40 percent to 50 percent of their gross domestic product
annually, a crushing burden on the private sector.
Dying populations is a second cause. After two world wars,
the Europeans lost their faith and embraced hedonism and
materialism, la dolce vita. Large families fell out of
favor. Women put off marriage and babies, and went to work.
Birth control and abortion were made readily available in
every country and, if not, just across the border.
For 30 years, the fertility rate of Europe has been below
the 2.1 children per woman necessary to replace a population.
In Russia and Ukraine, a million people disappear
yearly. In Western Europe, the passing of the native-born
goes on quietly, as Third World peoples come to fill the
empty spaces left by the aborted and unconceived.
Turks are in Germany. Pakistanis, Indians, Arabs and
Caribbean peoples are in Britain. Algerians, Tunisians
and Moroccans occupy the southern coast of France and
the banlieues around Paris.
These newcomers have neither the education nor skills of
the Europeans. Hence, they earn less and contribute less
in taxes, but consume more per capita in social benefits.
As the number of young entering the European labor forces
shrinks, the number of seniors and aged grows. And thanks
to advances in medicine, these retirees live lengthening
lives. Thus the burden of pensions and health care grows
steadily and the need for higher taxes and larger worker
Then there is globalization. In Europe, wages and taxes
are high, regulations heavy, unions strong, and lawyers
ubiquitous. Manufacturers, to cut costs, have been out-
sourcing production to where the labor is cheap and
abundant, the unions are nonexistent or weak, and health,
safety and environmental regulations are lax. Welcome to
Greece is the first European nation to hit the wall. As an
EU member state, she is obligated to keep her deficit to
3 percent of GDP. But this year's is 12.7 percent, and
Athens needs to issue $75 billion in bonds alone to finance
the deficit and roll over debt.
The markets, however, are rating Greek bonds as risky
bonds. To borrow, Athens must pay more than twice the
interest rate Germany pays. Faced with strikes by public
employees and students, Athens appears to lack the
political will to make the cuts necessary to bring the
budget back toward balance.
As Portugal, Ireland and Spain gaze on, Greece approaches
a moment of truth. Should she default, their bonds, too,
will plunge in value out of fear of a copycat default, and
the interest rate they pay would also rise. They, too,
might then take the Argentine road.
The EU's crisis would then be like a crisis in the United
States should California default on its state bonds and
interest rates on other municipal bonds surged to double
Is there a way out?
One option is for the EU to bail out Greece with a huge
loan. But if Greece cannot meet her debt obligations now,
how could she pay back the loan? And if the EU cannot
compel Greece to make deep budget cuts today, what
leverage would the EU have after bailing out Athens and
removing today's pressure on the government?
A second option is to call in the International Monetary
Fund, which imposes tough conditions on nations receiving
IMF loans -- the Third World therapy. But problems would
arise here, too.
First, it would be an admission that the EU cannot manage
its own household. Second, the largest contributor to the
IMF is Uncle Sam.
Why should America bail out Greece, when the EU is larger
and richer and did not help bail out California in 2009?
The stimulus bill did that in 2009, to which Europe
Where Greece is at today, however, we shall all arrive
In every Western nation, government is growing beyond the
capacity of taxpayers to bear. Deficits and debt are surging.
Not enough children are being born to replace parents.
The immigrant poor who consume more than they contribute
are coming to take the empty places. Seniors and elderly
are growing as a share of the population. Companies are
saying goodbye to the West and moving offshore to low-wage
The West begins to look like yesterday, while the East
begins to look like tomorrow.
The West is approaching a crisis of solvency and of
democracy. We shall see if democracy, which grew popular
lavishing benefits upon all, is strong enough to start
clawing them away. Or will democracy try to keep piling
the burden on the producers until they rebel or depart?
Click to view image: 'c78f3f3f3b20-european_union.jpg'
|Liveleak on Facebook|