Euro Collapsing? Europeans Divided on Cure

This crisis is much the same as the one we are facing in America - will the people decide that living in a dependent world where life is lived nearly hand to mouth, or one where they can accept pain now to save themselves and enjoy a renewed and rewarding life later?

Wisconsin is looking like the European model in that the people must decide this June whether they want to go back to a controlled progressive left and union dominated government of high debt and tax increases, or reelect a governor that eliminated the debt and did it without tax increases. Rocket science?

Now Ask yourself this question, why is there a recall to stop success? Who wants to stop prosperity from taking hold? Who would knowing want to bring back high taxes and more debt?

Europeans and citizens in America must decide and soon what they want.

The Euro End Game
Source: John H. Makin, "The Euro End Game," American Enterprise Institute, May 2012.

Europe has pursued repeated rounds of fiscal austerity and bank deleveraging in exchange for loans that were supposed to save the euro. The result has been a predictable recession with plummeting employment, incomes and prices, says John H. Makin, a resident scholar with the American Enterprise Institute.

The immediate result of this debt crisis is an increasingly radical political climate, pitting pro-euro politicians like Germany's Angela Merkel against anti-euro figures such as France's new president Francois Hollande and the current administration of Spain.

The backlash against euro-saving austerity measures isn't just political: it is manifesting itself in the economic policies of the heavily indebted countries.

•The Netherlands' conservative government has collapsed as austerity intensifies an already painful recession.
•The Spanish government has refused to impose the degree of fiscal austerity called for by the recent agreement to save the euro, recognizing that it cannot possibly reduce its deficits by the agreed amount.

Put simply, the primary measures that have been put into place to save the euro have intensified the pain of the recession, and have resulted in popular movements against the euro, manifesting in the elections of explicitly anti-euro politicians.

Looking forward, European leaders need to begin contemplating the long-term future of the euro and the European community at large. This entails a distinct decision: will Germany double down on European cooperation and save the community, or will it allow the eurozone to fall apart?

•Germany will have to allow debtor nations to borrow its credit-worthiness to preserve the euro.
•To this end, there will have to be greater movement toward a unified fiscal policy that is determined by the European community as a whole, allowing Germany to reign in the debt-tilted tendencies of Spain, Ireland and southern Europe.
•It would also require European bonds to replace the bonds currently issued by each separate government.

The pain involved in creating this sort of cohesion may be too much for the Germans to accept. Yet it is undeniable that the euro is coming to a crossroads soon, and a fundamental decision will have to be made.