Published on the Malta Independant¸ issue 2nd Jan 2011
Many have followed with trepidation the latest shock waves that have battered the euro currency. There have been well wishers who wrote in favour of buttressing the single currency¸ while on the other hand a growing family of sceptics count the days for the death knell that will lead to its funeral.
The Economist wrote on its front page last week that the euro must not shoot itself in the foot but try to calm the choppy waters as otherwise the consequences will be fatal for the beleaguered EU project. Imagine the dire consequences of a run on banks and financial institutions in weaker euro member countries and try visualising the massive loss of orders when exporting to such countries by the stronger members such as Germany¸ Austria and The Netherlands. Yes the pain is real. We have witnessed strong protests by angry workers (some with no job prospects) in Ireland¸ Spain¸ Portugal¸ Greece and Italy (collectively termed PIGS)¸ which make sickly headlines in today’s newspapers.
Workers expect their leaders to find the culprits responsible for the sudden drop in their living standards and do not want to drink from the chalice of austerity measures. But the Iron Lady in Berlin¸ namely Chancellor Angela Merkel¸ has asserted that the situation is serious and palliatives will not wash. She wants a more robust mechanism put in place to cope with potential miscreants who fail to observe the euro club rules and then expect a hassle-free bailout by default. Some agree with her policy since a no-pain-no-gain attitude could only lead to more failures. Others silently contend that the medicine will impede the chances of a quick recovery and that whatever the sour potion she prescribes¸ the magic will not work in the short term.
Is this the start of a vigorous anti-euro movement that is gaining strength particularly among euro sceptics in countries outside the euro club? Are the dissenters gaining strength? Nothing is certain except that the cost of rewinding back the 10 years of EMU and euro preparation will be a severe blow to all. The consequences may lead to a dreaded double dip recession in Europe. The BBC has reported that the Gremlins (read business people in dark suits driven in expensive cars) are starting to bare their sharp teeth¸ cutting to the fabric of the euro edifice. In Germany¸ the nostalgia for the once strong Deutschemark (DM) is haunting shoppers¸ with dreams of the glory and strength of the old currency that outshines the fading euro. This new feeling intensified after the Germans found themselves digging deep into their pockets to help in the bailouts of Greece and Ireland. Some are even wary of more demands in the near future if the economies of Spain and Portugal go down the same road. At a political level¸ can you blame the German voter for feeling that the promises made 10 years ago by politicians¸ when the euro replaced the Deutschemark¸ have been broken. Others are more cautious and respond that one swallow does not make a summer. This shows a tangible manifestation of solidarity to help each other as only thus can Germany keep progressing in its successful export drive.
Naturally¸ economists warn that in a doomsday scenario one cannot avoid the resulting grave political consequences of a ruined euro regime. The 10-year-old currency is more than a yardstick of wealth – it was a symbol behind a monumental project to unify Europe. So the option to di