Europe’s perfect storm - Collapse may decide fate of EU

A PERFECT storm is brewing right across Europe and no one, least of all the Greeks who attacked their parliament yesterday, knows where it will end.

Frighteningly, history shows us where it might.

Yesterday Greek air-traffic controllers and teachers went on strike. Shopkeepers shuttered stores to challenge Prime Minister George Papandreou’s decision to cut wages, pensions and increase taxes to secure a European Union €110 billion rescue package. The Greeks’ anger is rightly reflected right across the EU as workers see incomes cut and jobs put in jeopardy. At least three people died, burnt to death in a bank, during the Greek protests.

Earlier Angela Merkel, the German chancellor and Europe’s paymaster general, warned that the future of the EU is at stake. The German parliament votes tomorrow on a package that would see Germany lend €22.4 billion to Greece. Ireland has borrowed €1.3bn to fulfil our obligations under the rescue package.

Markets – those great unknown, dark forces with too much influence on our lives – responded by pushing the euro to a 13-month low against the dollar.

Investors and bond holders seem to believe that the rescue package will not work. The fear is that the Greek government does not have the capacity to deliver the kind of spending cuts and tax compliance necessary to encourage confidence much less stability.

Adding another layer of complexity, especially for Ireland, Britain goes to the polls today. The expectation is that the deeply Euro-sceptic Tories will be elected. The great fear is that, as well as introducing cuts right across public services, a Tory government will reduce its commitment to the principle of European solidarity. This would leave Ireland in an invidious position; do we follow our main trading partner – Britain – or do we cling to the EU, our main benefactors?

A Cameron government might have an unintended impact in the North where an exceptionally high proportion of the workforce depends on government jobs. If a good number of these were cut it could fuel discontent that might fuel festering terrorist groups. This would be disastrous for the whole island.

Spain has not managed to avoid the storm either. Prime Minister Rodríguez Zapatero was forced to deny Spain needed a rescue package similar to Greece’s. The situation is not helped either by the suggestion that the €110bn for Greece will be used to placate creditors rather than directly help the Greeks.

Greece’s terrible difficulties and the targeting of Spain give an indication of how vulnerable a heavily indebted national economy can be. Ireland, with debts of just over €600,000 million compared to Greece’s €163,805m, must learn the lesson.

This may not be the moment to try to return to pay levels reached a few years ago. There will be time enough for that when our economy recovers. And, almost amazingly, there seems to be a faint light on the horizon. Yesterday the EU Commission forecast that our economy will grow by 3% next year. This is one of the highest levels of EU growth forecast. Though it may seem the tightrope climbs away into the distance and the safety net shrinks by the day this is one reason to be optimistic. That optimism can only be made real through solidarity, some considerable sacrifice and great patience followed by social equity and visible justice.