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Bankrupt PIGS of Europe |

Bankrupt PIGS of Europe

| Wednesday, February 10, 2010 12:00 a.m


They are called the PIGS — Portugal, Ireland, Greece, Spain. What they have in common is that all are facing deficits and debts that could bring on national defaults and break up the European Union.

What brought the PIGS to the edge of the abyss?

All are neo-socialist states that provide welfare for poor people, generous unemployment, universal health care, early retirement and comfortable pensions. Most consume 40 percent to 50 percent of their gross domestic product annually, a crushing burden on the private sector.

Dying populations is a second cause. For 30 years, the fertility rate of Europe has been below the 2.1 children per woman necessary to replace a population. In Western Europe, the passing of the native-born goes on quietly as Third World peoples come to fill the empty spaces left by the aborted and unconceived.

Turks are in Germany. Pakistanis, Indians, Arabs and Caribbean peoples are in Britain. Algerians, Tunisians and Moroccans occupy the southern coast of France and the banlieues around Paris. These newcomers have neither the education nor skills of the Europeans. Hence, they earn less and contribute less in taxes but consume more per capita in social benefits.

As the number of young entering the European labor forces shrinks, the number of seniors and aged grows. And thanks to advances in medicine, these retirees live lengthening lives. Thus the burden of pensions and health care grows steadily and the need for higher taxes and larger worker contributions increases.

Then there is globalization. In Europe, wages and taxes are high, regulations heavy, unions strong and lawyers ubiquitous. Manufacturers, to cut costs, have been outsourcing production to where the labor is cheap and abundant, the unions are nonexistent or weak, and health, safety and environmental regulations are lax. Welcome to China.

Greece is the first European nation to hit the wall. As an EU member state, she is obligated to keep her deficit to 3 percent of GDP. But this year’s is 12.7 percent, and Athens needs to issue $75 billion in bonds alone to finance the deficit and roll over debt.

The markets, however, are rating Greek bonds as risky. To borrow, Athens must pay more than twice the interest rate Germany pays.

As Portugal, Ireland and Spain gaze on, Greece approaches a moment of truth. Should she default, their bonds, too, will plunge in value out of fear of a copycat default, and the interest rate they pay would also rise.

Is there a way out?

One option is for the EU to bail out Greece with a huge loan. But if Greece cannot meet her debt obligations now, how could she pay back the loan?

A second option is to call in the International Monetary Fund, which imposes tough conditions on nations receiving IMF loans. But problems would arise here, too.

First, it would be an admission that the EU cannot manage its own household. Second, the largest contributor to the IMF is Uncle Sam. Why should America bail out Greece, when the EU is larger and richer?

Where Greece is at today, however, we shall all arrive tomorrow.

The West is approaching a crisis of solvency and of democracy. We shall see if democracy, which grew popular lavishing benefits upon all, is strong enough to start clawing them away. Or will democracy try to keep piling the burden on the producers until they rebel or depart?

Pat Buchanan is the author of the book “Churchill, Hitler and ‘The Unnecessary War.'”

Categories: News
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