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What's Next for the Eurozone Debt Crisis? | Global Watch Cat

What’s Next for the Eurozone Debt Crisis?

 November 21, 2011 – Of the 17 nations tied to the Euro, five have now redirected their political priorities and financial philosophy as a consequence of the European debt crisis.  Yesterday, almost one year to the day after Irish Prime Minister Brian Cowen succumbed to the first debt-induced governmental collapse, Spain joined Ireland, Portugal, Greece and Italy in ushering in a leadership change in an effort to thwart rising unemployment, spiking interest rates on governmental debt and national discontent.  And with Spain’s changeover, so concludes the administration adjustments for the five countries who were designated as “at risk” for financial collapse.  The governments have changed for the so called “PIIGS,” but what now?  Certainly, neither the Euro nor the remaining 12 Eurozone counties are out of the woods.  [Vote in our Pulse Check Poll in the sidebar to express your thoughts on who is next.]

It is interesting to note the leadership changes that have resulted from the Eurozone crisis seemed to follow a similar path.  Four of the five governments were either Socialist or Populist pre-crisis, and all five moved toward the right.  This is not an unexpected result, since all five countries required austerity measures and some level of public services limitations. Even  Italy’s center-right government formerly led by conservative  Silvio Berlusconi, moved further right.  But what else can we derive from this trend?

Country

Pre-Crisis Government

New Administration

Spain Socialist Conservative
Italy Center-Right Conservative Technocratic
Greece Socialist Socialist w/ coalition from the Right
Portugal Socialist Center-Right Social -Democratic Party
Ireland Catch-all Populist Center-Right

 

The debt system in these five countries failed because governmental leaders did not see that uncontrolled governmental spending occasioned by increased tax revenue and inflated real estate values could lead to financial disaster if growth slowed, but national expenses continued to surge as more citizens benefitted from public supports and programs because governmental coffers were full.  But it’s not so easy to just cut the expenses off.  Reductions to programs like unemployment benefits, services to the aged or disabled, farming or housing subsidies will have an adverse effect on critical segments of the population.  So this is how GlobalWatchCat thinks this will play out….

It seems clear from the leadership changes that have occurred, the electorate of the above-noted countries recognize that the sovereign debt crisis will not be resolved by using Socialist philosophy.  Hence, citizens in the affected countries have moved towards conservatism in order to initiate change.  These leaders will struggle with how to divide a shrinking pie and ultimately need to call for even greater austerity which will further polarize the right and left.  Some of those measures will likely be extreme and those European countries that emerge from the crisis will be perceived as Fascist or undemocratic as a result of the practices and policies required to ensure economic survival.

I seem to recall that we have seen this story somewhere before…. let’s see… currency was devalued and the citizenry were living in spartan conditions….Europe was in flux… social policies were non-existent… and some countries which espoused Socialist policies (as a backlash to years of austerity) started to emerge….

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