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September 21, 2014 / 26 Elul, 5774
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Eurocrisis: Russia Offers Its Services

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Photo Credit: Ouria Tadmor/Flash90

Germany, however, is apparently opposed to a move which would provide profligate countries in Southern Europe with “a hammock made of German taxpayers’ money.” German Chancellor Angela Merkel knows that if she backs the idea of eurobonds she risks political upheaval at home. While the Socialists in the South, and especially the new French President François Hollande, insist on wealth-distribution from the North to the South, the German people do not want it.

Merkel, meanwhile, is pressuring Spanish Prime Minister Mariano Rajoy to ask for emergency funds from the eurozone’s temporary rescue fund EFSF. Spain is currently borrowing money on the international money markets at a 10-year interest of 6.7%. The eurozone countries are also putting together a permanent rescue fund, the European Stability Mechanism (ESM), with a capitalization of €80 billion.

It is doubtful, however, whether this will be sufficient. Spain not only needs €90 billion to save its banks; it also needs to bail out its regional governments, which have to refinance €36 billion in debts later this year. Further, Spain is not even the worst of the EU’s worries. Italy needs to refinance €200 billion later this year, while no one knows where to find that amount if the Germans refuse to foot the bill. Given such a hopeless financial situation, Europe’s politicians are preparing for political turmoil. But others seem well aware of the opportunities Europe’s problems might offer them. The Kremlin will not miss this chance. Already last year, Russian Deputy Prime Minister Arkady Dvorkovich said that Russia is ready to lend money and expertise to solve the eurocrisis. He offered “to both advise and also to contribute to the stability with our own financial reserves.” Last January, Dvorkovich said that “The survival of the euro is a pre-eminent concern for Russia;” last month he stated that Russia wants “Greece to stay in the eurozone.”

Russia undoubtedly has strategic interests when offering financial support to debt-ridden Europe. Many will lose through the eurocrisis, but Russia will not be among them. So far, Brussels has not turned to Moscow for help — yet. But if the situation deteriorates, that soon might be the case.

Originally published by Gatestone Institute http://www.gatestoneinstitute.org

About the Author: Peter Martino is a European affairs columnist for the Gatestone Institute.


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One Response to “Eurocrisis: Russia Offers Its Services”

  1. Mark Urbo says:

    The economic model which develops from a socialist political environment is at its very core unsustainable long term. While the underlining economic structure steadily decays over many decades there is lag effect (or relationship) between the decay and politics which generated the policies. That is to say the net effects of socialist policies do not immediately present themselves. It can take many years or decades for the general population to suffer the consequences of such policies.

    Inherently, socialism creates an ever increasing centralized government, which must justify its growing power, size and cost by providing more services, entitlements and regulation/protection to its citizens. The real time cost (i.e., year to year budget) of this ever increasing, self justifying central body is only one component. Long term legacy liabilities (i.e., pensions, benefits and other retirement based costs) of public sector employees grow at a significantly greater rate than similar private sector employees.

    Additionally, the continued growth of public sector employment undermines private sector stability and growth (i.e., a dollar or euro spent in the private sector in more efficient than the same unit spent in the public sector). Finally, the most concerning element is a labyrinth of regulations which stunt private sector business growth, individual freedom and retard investment capital required in the creation of new opportunities. Nowhere is this more evident than in the environmental regulations which have become an instrument of governments and environmentalists to undermine private sector business growth worldwide.

    Socialism sells the ideology of “equal outcome” for all as part of its imagined utopia, but even this concept is flawed at a fundamental level. Human behavior is such that it responds and performs better when it is duly incentivized and logically this does not occur in a society where a person is provided for regardless of their efforts or performance.

    The standard cliché of “socialism works until you run out of other people's money” is unfair and over simplified. However, if your economy is surrounded by failing economies based on socialism, your economy will undoubtedly suffer and also bear their burden, which seems to be playing out right now in the euro zone.

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