Will the Eurozone receive a wake-up call in the coming year of the rooster and finally come to a decision that allows its member countries to heal economically? This may very well be the case.
Tsipras has been pushing unpopular reforms devastating to many of his people, particularly poorer retirees, in order to keep ECB money flowing and so that Greek banks can function. His popularity has naturally been dropping. In order to try to ease the pain of some of the hardest hit, he provided one-time pre-Christmas payments to retirees making less than $800 euro per month.
Merkel has been struggling in regional elections as eurosceptic AFD has been beating her CDU party, with her CSU allies Still in the lead. Though she’s likely to get another term next year, she can’t afford to be seen as lenient on Southern Europe.
Italy meanwhile is having its own banking crisis – again – and Renzi has resigned as promised following his failed referendum. You don’t talk about national bailouts when banks are solvent:
Of course French banks have been having their own problems and those of Deutsche Bank are becoming ever more apparent.
Here’s tickle desiring some key election dates:
Essentially, the Eurozone is in a crisis. Ever since the creation of the Euro as a currency, industrial production has been slowly collapsing in Southern Europe- particularly France, Spain, and Italy while it has been growing in Germany. To make matters worse, Europe had followed the the ill fated financial deregulation started in the US by Bill Clinton, resulting in a lending/housing asset bubble far bigger than that of the US. The similar “solutions” of never ending bank bailouts, quantitative easing, and low interest rates – which merely gut the middle class to pump asset values for the rich – have been even worse than ours as they went on the negative interest rates and direct corporate stock and bond purchases.
As a result, the employment situation is bleak as those fortunate enough to work have significant underemployment, stagnant wages, rising costs, decreasing benefits and often little job security. Naturally this has a significant impact of family formation and birth rates among the locals. In come a large influx of Muslim refugees with very different cultures and higher birth rates enabled by the acceptance of having children in difficult and overcrowded conditions with extended families in tiny apartments. Not only does this supply a source of cheap labor pushing wages down further, but it makes many Europeans fear they are being replaced. Will they sit quietly by and watch their cultures disappear as foreigners pour in while their educated youth are forced to seek employment elsewhere?
The idea of any type of Federal Europe complete with legal & fiscal Union and permanent wealth transfers becomes ever more remote, leaving the breakup of the Euro as the only real solution. The Euro was known to be dysfunctional from the start, which is why the EU pushed so hard for an “ever-closer Union” despite its unpopularity among voters. Unfortunately, leaving the Euro currency also means leaving the European Union, though that might change as the cold, hard reality sets in. Regardless, the member countries are experiencing severe economic pain which can’t even begin to heal until the cause is removed. Like surgery removing a poison bullet, this will cause it’s own discomfort but is nonetheless necessary. Are they ready for real solutions? I think so, but I suppose we’ll have to wait and see.