A pro-austerity governing coalition is expected to be formed in Greece after the New Democracy Party won re-run elections June 17, temporarily easing concern that the debt-laden nation could drop out of the eurozone.
But this does not mean the eurozone debt crisis is over. A dark cloud is still hanging over Europe, with the crisis likely to spread to Spain and Italy.
Although the European Union has been trying to fix the debt problems plaguing the so-called PIIGS nations -- Portugal, Italy, Ireland, Greece and Spain -- over the past two years, the troubles are increasing. This demonstrates that the approach and strategy adopted by the European Union are flawed and need adjustment.
Nobel Prize-winning economist Paul Krugman got right to the point when he criticized the "arrogance" of European officials from richer countries who created the "deeply flawed" euro system in the first place. According to Krugman, these officials thought "they could make a single currency work without a single government" and insisted that "all the currency's troubles are caused by irresponsible behavior on the part of those Southern Europeans."
The European Union was originally aimed at building a community of shared destiny. But in dealing with the debt problems of those weaker economies, the union is too indifferent and rigorous. It does not act like a community, but like a "club of the rich." Those who fail to pay their membership fees are being punished and humiliated.
If the new Greek government is able to stabilize the country's situation and if European officials can more actively help those debt-laden nations, it may prevent the global economy from being dragged down by the PIIGs nations. Otherwise, not only only Greece, but the whole world will get it in the neck. (Editorial abstract -- June 21, 2012)
(By Y.F. Low)