TUMBLING exchange rates, gaping current-account deficits, fearsome foreign-currency borrowings and nasty recessions: these sound like the ingredients of a distant third-world-debt crisis from the 1980s and 1990s. Yet in Europe the mess has been cooked up closer to home, in east European countries, many of them now members of the European Union. One consequence is that older EU countries will find themselves footing the bill for clearing it up.
Many west Europeans, faced with severe recession at home, will see this as outrageously unfair. The east Europeans have been on a binge fuelled by foreign investment, the desire for western living standards and the hope that most would soon be able to adopt Europe’s single currency, the euro. Critics argue, with some justice, that some east European countries were ill-prepared for EU membership; that they have botched or sidestepped reforms; and that they have wasted their borrowed billions on construction and consumption booms. Surely they should pay the price for their own folly?
Yet if a country such as Hungary or one of the Baltic three went under, west Europeans would be among the first to suffer (see article). Banks from Austria, Italy and Sweden, which have invested and lent heavily in eastern Europe, would see catastrophic losses if the value of their assets shrivelled. The strain of default, combined with atavistic protectionist instincts coming to the fore all over Europe, could easily unravel the EU’s proudest achievement, its single market.
It’s hard to take to award the irresponsible, but that’s what’s happening on both sides of the Atlantic.
American elites traditionally consider Europeans (especially Brits) as their “betters,” but it doesn’t look like this opinion corrresponds to reality. This came out in an article from San Francisco Chronicle writer Debra Saunders entitled Bad Times Visit Our Betters in Europe. But, since we’ve elected the Elitist Snob to the White House and he has brought his ilk with him, we’ll never be able to prove them wrong. At least in the immediate future.
Note to Debra Saunders: if you want to find your “betters,” go to the Pacific Ocean and look outward. They’re in that direction.