Europe: Too Big to Fail

In the aftermath of the 2008 U.S. financial crisis the phrase “too big to fail” became a part of Americans social vocabulary.

The recent bailout in Spain and the turmoil in Greece, give me heart that “too big to fail” isn’t just an American thing.

As a general rule, I don’t like the notion of giving bailouts to countries that spent like there’s no tomorrow during good times, and now find themselves knee deep in debt.

Private citizens would not be afforded such opportunities, why should governments be so special?

The interconnected and global nature of the world economy is what makes governments special. If Spain and Greece go belly up, they take economic interests in Europe and the United States with them.

I don’t think people can understand that point enough. Having a globalized economy means that our fates are interconnected, whether we like it or not.

What we should be rallying against throughout the United States and Europe is the culture and circumstance that have made “too big to fail” institutions okay.

Elections in France and Greece: Wither Austerity

France and Greece held national elections last Sunday. The French ousted pro-austerity President Nicolas Sarkozy in favor of Socialist Francois Hollande, who has vowed to pull French troops from Afghanistan, increase government spending, including a 75% income tax on the rich, and renegotiation of a European treaty on trimming budgets to prevent a Greek like debt crises.

 Meanwhile in Greece, the voters ousted the current government and by extension the European Union negotiated bailout. Do these two results mean the death of austerity within Europe?

Austerity isn’t liable to win any popularity contests—anywhere. Certainly not in Greece where people are committing suicide because the cuts have left thousands of people without jobs, pensions, and livelihoods. In France, they also see a troubled economy that has muddled through austerity measures. If an economy struggles through austerity, than more spending must be the way out right? Add Sarkozy’s personal unpopularity and we may be able to explain these results.

 Ultimately, I believe austerity is the proper way forward, but as I am not French or Greek, so I didn’t get a vote.

Will China Save Europe?

In the midst of a European debt crisis, some European leaders are headed to China seeking its' help. But help from China, is unlikely to come at least on this trip.

Europe would like to see China show support for the European Financial Stability Facility (Europe's bailout fund), by buying European bonds. At present, China seems reluctant to do so because they are looking for stability before making a big financial commitment. Furthermore, China wants to be given market economic status and easing of Chinese exports, a move Europe seems less than enthusiastic about.

China is in the catbird seat here…conspiracy theories aside. China has large amounts of capital and Europe is desperate need. China mustn’t use this moment to gloat over their good fortune and Europe’s troubles because China’s economic success is not so great that it cannot go awry at a moments notice.

It’s actually in China’s interest that Europe remains viable as a trading partner. My guess is that China will provide some assistance, when Europe stops playing the house of cards that is about to topple. The real question for China is: When do you step in, and under what terms?