the whac-a-mole approach to fixing the euro

Oisín Mac Giollamóir explains European politicians’ ongoing failure to avert crisis

The great experiment of the European Union has continued its bizarre march into oblivion. I wrote the ‘unhappy economies’ article in the last issue of The Commune in early August, shortly after the Greek ‘bailout’ of 21st July. Since then much has happened… but equally, nothing much has happened.

The German Chancellor and the President of the European Central Bank calm market fears

First, how has the 21st July bailout worked out? Different for different countries. Oddly, for Ireland, things are looking rosy. The interest rate on two-year government bonds is now just over a third of what it was in late July. This has resulted in some bold confident statements from the Irish government about their achievements that are almost certainly a bit premature.

unhappy economies: greek debt, PIIGS and the eurozone crisis

Oisín Mac Giollamóir explains the meaning of the current European crisis, and the relationship between debt and class struggle

Happy economies are all alike; every unhappy economy is unhappy in its own way. The well-worn acronym PIIGS (Portugal, Ireland, Italy, Greece and Spain) conceals more than it reveals. The PIIGS are not all alike.

Consider the difference between Ireland and Italy. Pre-crisis Ireland had a debt/GDP ratio of 25%, one of the lowest in Europe. Today it’s over 100% and is projected to rise to over 120%. Ireland’s crisis is not due to an over-expanded public sector, unsustainable spending, persistent budget deficits or anything like that. It is due to the bubble in the property market and the ongoing mismanagement, largely at the European level, of its collapse . Over the last four years Ireland’s economy has been wrecked by the crisis.  In contrast Italy has had major problems for sometime. Italy’s debt, which has already reached 120% of GDP, does not reflect the kind of rapid shift that has happened in Ireland. Rather Italy has had a long run budget problem. Italy’s debt has not been below 100% of GDP since the early 90s. Italy’s debt problem cannot be blamed exclusively on the crisis in the same  that Ireland’s can.

It is therefore important not to conflate the differing problems faced by the PIIGS. When we talk about the Greek crisis we need to be aware of the particular nature of Greece’s problems.