Inequalities might lead to an end of the Eurozone

The fall of the Berlin Wall in 1989 showed that the time for much closer, stronger European bonds had grown near. Hopes for a peaceful and prosperous future were higher than ever, among both leaders and citizens. This led to the signing of the Maastricht treaty, which formally established the European Union in 1993 and created much of its economic structure and institutions – including setting in motion the process of adopting a common currency, the euro.

The eurozone structure

The basic idea behind the structure of the Euro was that self-regulating markets would ensure prosperity across the Eurozone as long as:

• Inflation was kept in check by the European Central Bank
• Member States had fiscal discipline, keeping their public deficits and public debt low

For these purposes, the European Central Bank was given a sole mandate to hit a 2% inflation target – regardless of patterns of unemployment and economic activity across the Eurozone. Unlike other Central Banks such as the US Federal Reserve, its mandate does not include ensuring price stability and guaranteeing full employment. Only the former is within the realm of its mandate.

Similarly, the Stability and Growth Pact required member states to ensure that their public deficit was kept below 3% of their national income (GDP) and their public debt did not exceed 60% of GDP.

The crisis

Since the 2008 crisis, the Organization for Economic Cooperation and Development (OECD), the European Commission, the National Institute of Statistics and Economic Studies, along with other statistics institutions within the European Trade Union Confederation, have all agreed on this fact: In recent decades, social inequalities have increased significantly across Europe. And not only in Greece or Spain: the situation is the same in Sweden and Germany. In the past twenty-five years Swedish society has experienced a considerable growth in inequality; according to the OECD, between 1985 and 2008 the country recorded the highest growth of income poverty among industrialized countries.

After its implementation, the euro fairly quickly became the second most important currency in the world, but as of 2015, it has failed to supplant the U.S. dollar at the top of the world’s monetary heap. 

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Greece is the clearest example that hostage to austerity cannot work in Europe.

Reuters reported earlier today that Greece and its European creditors agreed Monday to resume talks on what economic reforms the country must make next in order to get the money it needs to avoid bankruptcy and a potential exit from the euro this summer.

Greece has been trying to stay afloat ever since the financial crisis began in late 2009 as the government battled low growth rates, soaring inflation as well as high budget and trade deficits. That’s when the International Monetary Fund, the European Central Bank and the European Commission, also known as the troika of lenders, stepped in. But that came with a price. To date the government has had to slash spending by over 75 billion euros. Education, welfare and healthcare saw deep cuts.

The controversial and much discussed possible exit is often referred to as “Grexit”, a portmanteau combining the English words “Greek” and “exit”. The term “Graccident” (accidental Grexit) was coined for the case that Greece exited the EU and the euro without intention.

Starting from 2010, the seat of the Greek government was thus effectively transferred from Athens to Brussels, Washington and Berlin. Left in Greece itself was little more than the power to administer national policies and implement sovereign decisions made abroad.

People took to the streets as many lost their jobs, while others saw their pensions and salaries significantly decreased. To make matters worse Greeks were expected to contribute more since taxes and the overall cost of living went up. Homelessness and suicide rates skyrocketed as people couldn’t cope with their new reality. Greeks felt betrayed by their government for allowing the situation to get to breaking point.

In 2016 Greece has a new challenge – the refugee crisis. The country has shown great humanity to those who have lost everything despite the fact that Greeks are still suffering themselves. The Greek crisis doesn’t make international headlines the way it used to. Is it because the situation is improving or because people have lost hope that anything will change? After all, it was only a year and half ago when 61 percent of the population voted against the new bailout conditions proposed by the troika of lenders.

How do those people, the majority, who voted ‘No’ feel considering the prime minister ignored the majority and implemented even more austerity measures?

*With sources from RT.com

Oil prices rise on OPEC and Russia’s deal to cut production (en/fr)

According to Reuters, the Organization of the Petroleum Exporting Countries (OPEC) said Wednesday that it would cut production by 1.2 million barrels a day from 33.6 million barrels and said it expects producers from outside the group, including Russia, to join with additional cuts totaling 600,000 barrels a day. On Thursday, 12/1, Azerbaijan said it was also willing to engage in talks on cuts while Indonesia suspended its membership. 

José Manuel Barroso : Goldman Sach’s, Hedge Funds, Lobbying and the City

The former Portuguese president of the European Commission, José Manuel Barroso, who was president of the Commission for 10 years until 2014, was named in July of this years as a chairman of Goldman Sachs International to assist the bank regarding Brexit issues. For BBC, Goldman Sach’s  is a powerful player in the City of London.