Europe is saved! Or is it?

So this morning it was proudly announced that the leaders of Europe had worked tirelessly throughout the night in order to come up with a bailout out plan for Europe, which the Times quoted as would help ‘the whole world’. I agree that Europe, and the world, is in a crisis and something needs(ed) to be done but is the solution really just to pump around 1 trillion,(880BN to be exact! BBC.co.uk) more euros into the system? In my opinion the real problem is deeper than just certain ‘B’ countries such as Greece, Italy and Portugal being in debt but the whole structure of modern society. By just pumping more money into resolving the problem is frankly just a short term solution. Surely in the long run or maybe even medium term the problem will just arise again.

If you just bail a country out (such as Greece) but they do not change their structure then the theme will become reoccurring, which it already is. Greece already made promises to change after entering the EU, with falsified data if I need reminding you, and now we are back to square one needing to give them large sums of money. I say ‘we’ as in Europe, as England have been quoted saying that they will not be contributing to this plan (bbc.co.uk), which comes at a time of much debate over England to whether they want to integrate further into the EU. Hating to be too depressive about the situation my final problematic thoughts are that a country such as Portugal and Italy can look at the situation in Greece and reason as follows, ‘why should we rectify our problems when we know the EU will just bail us out when we have accumulated enough debt?’ A sort of déjà vu for certain banks during the banking collapse no? As I say if your debt is big enough, soon it’s not your problem anymore!

The Inside Job

Last week our class was given the opportunity to watch the “Inside Job” instead of our normal lecture. Having seen this movie, (or horror movie as some people may have described it), I knew what to expect. The movie/documentary try’s, and in my opinion succeeds, in explaining what happened during the last financial crash. The film is given much credibility by the fact that there are interviews with the heavy hitters in the industry.

(http://www.webmallindia.com/buy_dvd_online-movie-INSIDE+JOB-p-18909.html)

The first aspect that sickens myself is how economists from Ivy League universities were paid money in order to write reports condoning deregulation. The main issue the film raises here is how ‘unethical’ this is as when the Banks who are in favor for this deregulation are paying large sums of money for the report to be commissioned then it is perhaps in the economists benefit to write what the banks want?

The second issue is that of the bonuses taken by the CEO’s of the banks. I understand that during good times when the bank makes a lot of money that they feel they deserve a bonus but when the bonuses are so ludicrously high (over 100 million to one CEO in 1 year), then something seems to be wrong. My proposal of re-structuring the bonus scheme would be as follows. I would pay all the money that would normally be paid as a bonus into a fund. Each year the fund would pay out a certain percentage such as 20-30% but if the bank had a loosing year then the loses would be recouped from this fund. This would give more incentive to bankers for longer sustained profit and growth instead of just gambling recklessly as they realize if the gamble works they get a huge bonus and if not they get a ‘golden parachute’ and new job offers in another bank.

The collapse of the European union?

For several weeks there has been ongoing debates to whether Greece will finally default and the implications that this would bear. It seems that so many other European countries are so heavily involved in Greece such as Italy, Spain and Portugal that the repercussions could be immense. Personally I feel that the collapse, if it happens, would send a domino effect across Europe leading to several other countries being forced to default. 

(http://de.toonpool.com/cartoons/Greece%20economic%20crisis_74175)

But the question in my opinion is whether this disastrous news could actually be the beginning of real change for the better. For more than 60 years, Europe has been plagued with the bureaucracy that the EU has forced upon its members. Perhaps the EU wasn’t/isn’t such a great idea as many ministers have tried to convince its citizens. I will not bore you with the reasons why the EU was meant to be so amazing but rather direct you to a different union such as NAFTA (North American Trade Agreement), which creates the same sort of linkage between countries without having to force the countries involved to suffer, i.e. bail it out, when one of its members has a crisis.

(http://www.toonpool.com/cartoons/summit%20confrence%20greece_133590)

Why the EU has tried to create one country out of all its members stipulating that trade would be impossible without this is beyond me when the example of NAFTA exists. Of course the breakdown of the EU is rather more complicated than just one country defaulting. In my view the creation of the EU was to try and build a super state that could rival China and the USA but furthermore the exit clause of the EU does not exist meaning this eventuality was never considered or more cynically an exit was never to be tolerated.