Europe’s politicians will not admit it openly but they are afraid that the dire economic situation in countries such as Greece and Spain might lead to revolution. In two weeks’ time, the Greeks will go to the voting booths again. The far-left Syriza party is leading in the polls. During the past months, violence has hit the streets of Athens and Thessaloniki. Desperate people are committing suicide in public, reminding Europe’s leaders that the so-called Arab Spring, which toppled many Arab regimes, was triggered in December 2010 by the self-immolation of a street vendor in Tunisia.
Later this month, Greece needs a new round of €5.2 billion in bailout funds from the other European Union countries. In return, the Greeks must pass €14.5 billion worth of austerity measures. With a newly elected Greek parliament unwilling to introduce them, however, and with Greek politicians threatening to annul prior loan agreements, other countries are unwilling to come forward with new funds. Meanwhile, Greek citizens are moving their money out of the country, exacerbating the situation of Greece’s banks. The prospect of a bankruptcy of Greece, and of the country leaving the eurozone, seems ever more likely. Grexit – as the European media call the scenario of Greece leaving the euro – is a possibility. But how will the Greek people react? If the level of anger and frustration keeps rising in Greece, the country might descend into chaos.
The situation is equally unstable in Cyprus. The economic situation of this strategically located country is inextricably intertwined with that of Greece. A collapse of Greece will drag Cyprus along with it. Economists expect that to keep Cyprus afloat, it will need between €25 and 50 billion from the other EU countries. If the EU does not provide the money, others might. Last December, Russia already gave Cyprus a bilateral loan of €3 billion. Russia is definitely capable of bailing Cyprus out. The Russians, however, are likely to want something in return. If Russia steps in, the strategic situation in the entire Eastern Mediterranean could change. Given the large gas supplies in the waters around Cyprus, Turkey, too, is interested in gaining a stronger foothold in Cyprus. Can Israel tolerate this?
Greece and Cyprus are not the only countries in Southern Europe that are heading for political instability. In Portugal, Spain, and Italy there have also been street protests in response to austerity measures. The EU is particularly worried about Spain. Last week, the Spanish Socialist former Prime Minister Gonzalez said that his country is in a “state of total emergency.” Spain is heading full speed for a debacle.
Last month, panic-stricken Spanish citizens withdrew more than €70 billion from Spanish banks and moved it to foreign safe havens. While Greece is confronting Grexit, Spain is already in the grip of what the European media call Spanic. The Spanish banking sector is about to collapse. Bankia, Spain’s third largest bank, urgently needs the Spanish government to bail it out with €21 billion. Bankia, a state-owned institution which was formed last year out of the ruins of seven regional banks which could no longer shoulder the huge losses of the Spanish real estate crash, is virtually bankrupt. To save the Spanish banks, however, the debt-ridden government in Madrid needs at least €90 billion.
Meanwhile, with youth unemployment higher than 50%, Spain’s younger generation has no prospects whatever. They have nothing to lose and, hence, can be easily persuaded to rebel against a political system that seems incapable of offering them hope for a better future. This is a politically dangerous situation, which the United States should be taking into account. The whole of Southern Europe might soon be in turmoil.
If Spain goes down the drain, Italy is bound to follow. And if Italy, the third largest economy in the EU, goes, France is likely to go as well. The Europeans are preparing for disaster. In May, economic activity in the eurozone countries, including France and Germany, contracted at the fastest rate since June 2009.
Last week, the heads of government of the eurozone countries met in Brussels for their 19th emergency gathering since the eurocrisis began two years ago. Spain, Italy, and France have stated that they want the European Central Bank to intervene by issuing eurobonds, pooling the sovereign debts of all 17 eurozone countries.
About the Author: Peter Martino is a European affairs columnist for the Gatestone Institute.
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