The Troubles of the European Union: An Interview with Dr. Hollander
The other day I was listening to National Public Radio (I know, ironic) and, as I am both a political science and German major, I could not help but listen to the ever-growing concern about the European Union. For those of you who might not know, which I am not even sure is possible unless you live in a cave, there is a crisis on the other side of the pond and its name is debt. It’s odd how that seems to be a common problem in the world today.
A Reuters report claims that by the end of this year, Greece’s debt will be 162 percent of its total economic output. In other words, Greece is nearing a crisis and, unfortunately, it is not the only EU member facing such a problem. Nations such as Portugal, Ireland, Italy and Spain are also feeling the pull from the 2008 recession, but not to the extent that Greece is. German Prime Minister Angela Merkel and French President Nicolas Sarkozy have had a lot to discuss as both Germany and France are playing hero in the present crisis. Germany is doing well, excluding the population issue, and has done quite a bit thus far in helping other members of the European Union. The question I as well as others are asking is this: What is to happen now with Germany, France, Greece, and the rest of the European Union with the issue of economic debt and uncertainty looming over Europe?
One possibility for Germany is—prepare yourself—leaving the European Union, getting rid of the Euro, and readopting the Deutsche Mark. German publications such as Handelsblatt and Der Spiegel have been preaching doubt in the sustainability of the Euro and are actually predicting the Mark to take over for the Euro in Germany. I wanted to ask someone who has taken this into consideration, so I interviewed Dr. Ethan Hollander, a Doctor of Political Science and professor here at Wabash.* The answer he gave me to this question was so straightforward I had to put it in here. Dr. Hollander’s reply was this: “Let me put it this way. What would you do if you had a friend who racked up huge debts at the Cactus and now wanted you to help him out? All those nights he was out partying, you were home, doing what you [were] supposed to do, saving money and eating at Sparks.
“On the one hand, the right thing to do is to help your friend out—he is, after all, your friend….and he promises that he’s learned from his mistakes, that he’ll pay you back, that he won’t do it again. But you’ve given him money before, and your friends have too, and you saw what he did with it, and frankly, you don’t really believe him. You don’t want to lose his friendship, to sever ties or to kick him out of the house. And you sincerely wish him well. But you also can’t afford to bankroll his economic security when yours is also in question. And so you’re about ready to call it a loss and to go your own way. Well, which would you do? I can’t [say] which is the right choice, but I can assure you that neither is really good.” This is a very true statement. On one hand Germany could look out for itself and pull away from the Union, but what would that do to other nations who have invested so much and have built their infrastructure around the unionization of itself and other nations? If Germany were to do what is best for itself, it would readopt the Mark and take a position similar to the one the U.K. has taken. However, if Germany intends to fight for European stability and economic unity in Europe, it would remain a member of the European Union.
One solution to this problem is a bailout created by France and Germany. The feelings from French and German citizens about having to bail out Greek and other European markets is not positive. Dr. Hollander explained the situation well: “…Germany and France face a terrible dilemma…As part of EU integration, the rich (some would say ‘responsible’) countries of Europe share an economy with the poor (‘irresponsible’) countries of Europe—they trade with one another, they share a currency, they cooperate and they build things together. As a result, countries like Germany and France will suffer if countries like Greece (not to mention Italy, Ireland, Portugal and Spain) go bankrupt. In a way, their only choice is to help. But as you might imagine, this isn’t very popular with the citizens of Germany and France, who, quite reasonably, don’t understand why they should pay for the mistakes of other countries. You see, Germany and France don’t typically spend money they don’t have—and so if they were to give money to Greece to pay Greece’s debts, the people of Germany and France would have to pay for it in the form of higher taxes. Nobody likes paying taxes. But taxes are particularly irksome when they are raised to pay for someone else’s mistakes!”
This is such a true statement and it is difficult to really say whether France and Germany should continue to bail out other nations. In my opinion, this could be a very slippery slope Germany and France are embarking on. Let’s say that Germany and France bail Greece out and all is well. However, what about the multiple other nations that are facing economic crises? If Italy, Ireland, Portugal, and Spain need help, will France and Germany come to their rescue? If France and Germany continue to help out other nations by the hands of their own economies, what will the outcome be? Playing banker could be detrimental to France and Germany, especially with the world market being so fragile.
So, what exactly can the United States learn from Europe? Perhaps the United States’ government should learn what Greece’s has: you should not amass a debt exceeding the economic output. Greece faced the issue of an economy in recession, and according to Dr. Hollander: “Greece’s solution to this problem was to spend money it didn’t have, a wonderfully sound public policy in the short term—and one that many countries, including the U.S., are starting to follow. But not something that works particularly well in the long term when the people who lent you the money—the money that you spent on things that you now can’t afford—return and want their money back. Many a U.S. homeowner is very familiar with this situation.”
Looking at Greece’s example, the United States should definitely be making long-term decisions instead of these very shortly lived programs that are costing billions and even into the trillions of dollars. Can future generations handle the amount that we are spending right now? Greece is incredibly small in comparison to the United States, but even to economic giants such as Germany and France, the debt it has created is a large problem. If the comparatively small debt Greece has produced has become such a large problem in the eyes of the world, what will the debt of the United States look like when it finally gets to that point? The great debate in 2012 will be about the economy. Let’s be completely honest, the economy will be the foremost argument in the Presidential race.
If the question is what we can learn from Europe’s current crisis, then the straightforward answer is to stop spending money like a teenaged girl who just got her first credit card. Although this is a harsh reality, fiscal conservatism is proving to be the logical approach to the economy and even Democrats are beginning to agree. I have no doubt that Germany and France will pull Greece out of its economic crisis, but will there always be a Germany or a France to bail out less fortunate nations? In our case, probably not.
*A special thanks to Dr. Hollander for his continuing support for the Conservative Union and productive discourse. We appreciate all he has done and is doing for our organization and other organizations on campus.
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