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The Euro Debt Crisis and the Collapse of Europe

The Euro Debt Crisis and the Collapse of Europe

THE EURO DEBT CRISIS AND THE COLLAPSE OF EUROPE - Unless you’ve not seen a television set, browsed the internet or read a newspaper over the last few years then you should be reasonably familiar with the current financial situation in Europe.

The issue facing us now is a critical but simple question … what next?  That is, after seeing Greece, Italy, Ireland, Portugal and Spain failing to repay their debts and seeking a bailout from other EU member state, what is going to happen when all these countries, and indeed others within the Eurozone, go back to the European Central Bank and ask for more money?

The only answer the politicians appear to have is to provide a bailout; but where is the money going to come from?

The answer to that conundrum is from richer EU member states such as Germany, France and Britain but the issue with this concept is that each of these countries are already heavily in debt and therefore will simply have to take on more debt just to bail out another country who has effectively declared bankruptcy due to not being able to repay it’s current level debt.

By now you’re probably shaking your head wondering how a country in debt can possibly provide funds to simply bail out another country that effectively defaulted on its financial responsibilities and pushes it further into debt… after all if it couldn’t pay the original debt then surely taking on more debt is preposterous?

Yes, is the only simple answer but knowing the answer and providing a solution are two totally different kettles of fish.

The reality to the current financial crisis is that it will get worse; currently a number of EU member states have been bailed out and on more than one occasion.

Last year we witnessed the crisis in Cyprus where the Government effectively wanted to steal the public’s money from the banks to bail it out; such a notion was also heavily supported by the European Central Bank.

Currently not one EU member state is technically solvent; that is they are all holding vast amounts of debt and many economic experts believe that it will take but a small rise in interest rates to see more EU members states collapse, who will in turn ask other bankrupt EU member states to bail them out.

At some point the system will collapse and Europe will be plunged into Europe wide riots and violence with the public taking to the streets and protesting at their Government’s stupidity to lend and borrow money that is simply not available.

http://www.youtube.com/watch?v=XMhJuhw-Dds

What is the answer?  In the lead video the narrator looks at a number of scenarios that could help reduce debt by getting more people back to work, creating greater levels of spending by the public and Governments in order to fuel greater levels of taxation.

The issue with this is that Governments would need to spend money they simply do not have; therefore creating even more debt and once that gets to a level whereby they cannot repay the interest on the debt they will be forced to seek a bailout, effectively creating more debt, and the vicious cycle continues.

A flourishing economy is achieved through moderation; in other words the banks are held accountable for the amount of lending, people control their spending habits and Governments help businesses to create jobs and wealth; this is turn creates larger amounts of taxation in which enables the Government to provide such help.

We are all family with the word ‘austerity’ but do we really understand its meaning and what such a notion entails?

In economics, austerity describes policies used by governments to reduce budget deficits during adverse economic conditions. These policies may include spending cuts, tax increases, or a mixture of the two. Austerity policies may be attempts to demonstrate governments’ liquidity to their creditors and credit rating agencies by bringing fiscal incomes closer to expenditures. Wikipedia

In basic terms austerity is all about moderation, control and responsibility; something that is clearly lacking in modern Governments and the banking system.

Each of the European Governments continue to talk of austerity but not within the realms of Government responsibility, moderation or control but rather forcing the taxpaying public to adopt such measures which is clearly driving more and more citizens below the poverty line and in turn forces Government to provide ever higher levels of welfare.

Welfare remains one if not the biggest issues, for the cost of providing welfare to a nation simply increases the national debt and diverts money away from a Government’s ability to assist areas that would produce economic growth and prosperity.

What will 2014 bring?  Currently that is a highly contentious subject; some think that 2014 will be the year when the EU and indeed the U.S economies will collapse.  Others feel that 2014 will simply be a year of tighter austerity measures resulting in greater levels of welfare and therefore Government debt.

There can be no denying that our economic future remains bleak and maybe it is time that the EU was disbanded and each country once again took responsibility for its own fiscal and monetary policies.  It could of course, already be too late for such a move.

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Euro Debt Crisis 2014