The End of the Euro is Fast Approaching

Posted by PITHOCRATES - May 12th, 2012

Week in Review

This is the end.  Beautiful friend.  This is the end.  My only friend, the end.  Of our elaborate plans, the end.  Of everything that stands, the end.  No safety or surprise, the end.  I’ll never look into your eyes…again. 

Of course, Jim Morrison wasn’t writing about the Euro when he wrote The End.  And the Doors didn’t sing much about public finance.  But whenever a love affair ends it is painful.  Whether it be with your significant other.  Or a common currency that was going to change the economic order of the world.  Especially when foolishly rushing in mistaking desire for love.  The warning signs were there.  The lying.  And the cheating.  Fudging their numbers to meet the requirements of the Maastricht Treaty.  But what love can ever last when based on a lie (see Fitch Warns Euro Zone of Downgrades If Greeks Exit by Reuters posted 5/11/2012 on CNBC)?

Credit rating agency Fitch put the whole of the euro zone on notice on Friday that were Greece to leave the currency bloc as a result of its current crisis, the remaining countries could find their sovereign ratings at risk…

It said those countries were France, Italy, Spain, Cyprus Ireland, Portugal, Slovenia and Belgium…

The leaders of Greece’s once-dominant political parties were making a last push on Friday to avert a new election, which a poll showed would give victory to a radical leftist and doom an EU bailout — its second — agreed in March.

The majority of Greeks want to stay in the euro zone but voted last Sunday for parties that reject the severe terms of a bailout negotiated with foreign lenders.

European leaders say Greece will be ejected from the common currency [EUR=X  1.2914  —  UNCH  (0)   ] if it turns its back on the package of tax hikes and wage cuts.

Well, then, goodbye Euro.

You can’t stay in the Euro if you need a Euro bailout but reject the terms of that bailout.  For if you’re in need of a bailout you really can’t dictate the terms of that bailout.  That usually falls to the party who has the financial wherewithal to bail you out.  And that’s not Greece.  So sad considering so much of Western Civilization came from Athens.

So what will it take to learn that an ever expanding welfare state does not work?  How many more nations must fall?  All of Europe?  Will that be enough for the United States to learn the folly of their current economic policies?  Probably not.  They will follow Europe.  Who will follow Greece.  Buying votes with welfare spending.  Until they cross the point of no return.  Where the people will reject austerity.  And responsible governing.  Because their government taught them to.  Always assuming that the day of reckoning will come in some other generation.  Not in the current one.  But the day of reckoning has arrived.  Greece cannot borrow enough money to meet their spending requirements.  For when a government spends more than they can borrow it’s time to cut your spending.  They fudged their debt and deficit numbers to join the Euro.  And their numbers have only grown worse ever since.  And no amount of Keynesian math or class warfare can change that. 

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