There is a new acronym "PIGS" floating around. It refers to the countries of Portugal, Ireland, Greece and Spain. They all share one thing in common their currency is the Euro.
The Euro is a peculiar creation. Most currencies evolve out of the individual government and are subject to regulation by the state. In this case, a group of countries got together and formed an economic union supporting a common currency. The thing that distinguishes this currency from all others, is that there is no inflationary printing of money unless all nations agree to it.
Greece is the poster child for the Euro. Their government has lied to the people for so long that the aspect of an overthrow of the government isn’t what could be considered plan B; it’s plan A. Greece has frozen wages and increased taxes, to get in line, with what the Euro community expected them to do to get their house in order. The problem is; it doesn’t appear to be working. The people there, are fed up with the conflict between the political rhetoric and the economic reality they have to live with.
Then we have Portugal and Spain waiting to see what will happen to Greece. They too, would like a bailout. Somehow Ireland got swept under the carpet (2.39 Trillion dollars worth of debt???). The Euro is one of those concepts doomed to failure. It was a great plan to facilitate economic free trade. The trouble was that it removed the politicians’ access to the government check book. They could no longer fiddle with the currency to balance the budget, like the United States and Great Britain. This collective economic bond to the Euro prevents the politicians from spending more than they collect in taxes. Some countries promised the moon and now can’t deliver; the money isn’t there.
The Euro’s impending collapse centers around nationalism. The European confederation cannot come to an agreement. Why should a German or Frenchman take money from his kids future, to give to someone in Greece or Spain? Why should countries who acted responsibly, be taxed and have that revenue given to those that didn’t? The Germans don’t want to bail out the “shiftless” Greeks. On the other hand, the Greeks had a taste of Hitler decades back and don’t want these” Krauts” controlling their lives for a second time; telling them cut wages and increase taxes. Nationalism is a pot boiling over in Europe.
In most countries, the decision to inflate/ debauch the currency is not one that comes up for a vote--- it just happens quietly. With the Euro, that question will have to come up for a vote in the future; and it has to be unanimous. A collapse of the Greek government could make that vote a moot point. Look for the European Union to break up, they can't afford to feed the PIGS.