Commentary: If Europe fails, we will all pay the price

The Miami HeraldOctober 8, 2011 

Europe has long offered a kaleidoscope for the mind and the senses. It combines the heights of human achievement, the perils of profound human failings, and the inescapable toll of the passage of time. What will remain of what we have built? Which great powers will fall, and which nations will emerge as tomorrow's great powers?

The questions seem particularly relevant today, as the continent tries to stave off a looming economic crisis - one that could have repercussions throughout the globe.

Nothing could sound more arcane than the debt crises brewing in places like Greece, Italy, Portugal and elsewhere in Europe. It's easy to pay only scant attention to developments such as a European bailout vote in parliament in Berlin, public disgust with politicians in Rome, or workers' strikes in Athens. But, as happened in the Middle Ages or in the 20th century, the outcome of events here can have a powerful impact on the everyday lives of individuals everywhere.

Europeans are trying to prevent the collapse of the Eurozone, the single-currency economic area they have spent decades building, hoping to ensure prosperity and, hence, peace.

The main focus of attention now is Greece, whose national debt in 2010 reached more than 140 percent of GDP. (The equivalent U.S. figure was 93 percent.) With the discovery that Greece owed much more than it had admitted, lenders ran away, leaving Athens unable to borrow more to cover those debts. Since it used the Euro, it couldn't simply print more money. If it declared it couldn't pay and defaulted, the entire Eurozone's solvency might come into question. Only Europe, and its prosperous German core, could now save the economic union.

Suddenly, the finances of other European countries, too, triggered alarms. The economic bloc's survival came into question. And with it, the ability of the continent to preserve a standard of living and a level of social guarantees that have been unequaled in human history.

The problem, in a situation echoed throughout the world, is not just one of economics. Politics, flawed human beings, lie at the heart of the crisis. Success will require strong political leadership and the ability to persuade voters in rich countries to help those in the struggling economies of the periphery. It will require making economies more competitive by persuading businesses, retirees, labor leaders, who had come of age expecting only protection from the state, to agree to painful sacrifices.

The ratings agency Standard & Poor's downgraded Italy, not so much because of its financial condition, but because of doubts about whether its political system could successfully deal with the country's problems.

Throughout Europe the push is now to cut debt and to balance budgets, even in economies that are already in the midst of recession. Some are warning this will produce an even deeper contraction, more misery, and more disillusionment. One hears nervous muttering about what happened in the Europe of the 1930s.

The truly important part; more than the sharp cuts in pensions, government jobs, and social benefits, is the reforms to labor laws and economic structures that have caused economies to stagnate. Europe is trying to reinvent itself without throwing away its achievements.

It all sounds complicated and remote. But if Europe fails, we will all feel the repercussions.

Most of the world had nothing to do with the decision to create the Euro, the European currency. But if the Eurozone starts to fall apart, Europe will go into a profound recession. The recession will spread to the United States. A global depression could follow. American could see even higher unemployment and larger deficits. China will have fewer customers in the U.S. and Europe for its massive exports. Latin America and other developing countries will find lower demand and lower prices for their natural resource exports. No country will emerge unscathed.

Looking back at the mighty European empires that have risen and fallen, some may want to gloat over modern Europe's troubles. But an economic calamity would not stay within the continent's borders. That's because today, more than ever before, no land is an island.

ABOUT THE WRITER

Frida Ghitis writes about global affairs for The Miami Herald. Readers may send her email at fjghitis@gmail.com.

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