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December 5, 2011

Crisis in Europe


December 5, 2011

Europe may seem like half a world away from us, but events there, especially fiscal events such as the crisis currently convulsing the European Union, touch us too. The turmoil on the European markets and in the banking and finance sectors generally has now been going on for months, with supposedly ‘decisive’ meetings usually involving Chancellor Merkel of Germany and President Sarkozy of France occurring almost fortnightly. The great European experiment of a single currency stands on the brink as the Euro edges towards failure – a financial hole that is deeper and blacker than can be imagined. The current crisis has its origins in the Maastricht Treaty, drawn up almost exactly 20 years ago in the city of the same name and with the grandest of intent. The vision was bold, and twenty years ago nobody anywhere had envisaged the convulsions that have crippled large parts of the global economy and ruined countless lives. Today, it is Chancellor Merkel who is the mechanic-in-chief as the euro-car sits in the garage, its engine firing on about half of its 17 cylinders.
At the heart of the crisis is a scenario familiar to all of us in Pakistan – corruption, a failure to collect taxes, bloated public-sector workforces that haemorrhage money and weak governance. Greece is the economic equivalent of the walking dead, Italy is still trying to come to terms with the post-Berlusconi era, and Spain and Portugal totter like toddlers. Germany has the strongest European economy and has now taken the lead in the rescue bid, but for anything to work there is going to have to be a renegotiation of the Lisbon Treaty of 2007 – in itself risky as, although Europe is united by treaty, it is far from united in terms of economic harmonisation between member states. Getting greater centralisation of European budgets is going to be uphill, and Merkel herself said it could take years for the crisis to subside. For any solution there is going to have to be a ceding of sovereignty

if monetary union is to be preserved, and nations are going to have to surrender budgetary and fiscal powers to a central European authority for their budgets to be given the ‘yay’ or ‘nay’ — a prospect that the sick men of Europe view with apprehension and distaste. What Merkel – who perhaps to many may be the most important woman in the world at the moment – is seeking is not so much a resolution to the current crisis as a mechanism to make sure it never happens again. The EU is our largest trading partner. Far away it may be, but it reaches the spinners of Faisalabad and Marshall McLuhan’s global village has embraced us all.

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