No one has thought that the rising eurozone will ever face a financial dogmatism. European Union, once considered as a potential rival to the US, the world’s largest economy, is today increasingly losing its stance and is suffering a clear leadership failure. Both financial pundits and diplomatic psychoanalysts are describing the EU as ‘no-hoper zone’ with no consistency on its future role. Today the analysts are finding a bit difficulty to analyze the ‘herd behavior’ of the EU and are questioning about the stability of its single currency. Eurozone needs a strong leader who will stabilize its economy and restore its rising growth. Due to increasing fragile of financial credibility and political destabilization in some of its member states, the EU is today suffering the hypersensitivity of its position, dignity and power to its rivals. Greece, with foreign debt 200% of its GDP and an average debt of 38,073 euro per person, is heavily indebted to eurozone countries and the biggest fear is the factor of ‘contagion’ that its financial catastrophe could have a similar effect to other member countries. Spain with 41,366 foreign debts per person with a 67% govt. debt to GDP is increasing pressurizing not only on EU but also the global economy. Italy, the third largest economy in the EU and the seventh largest in the world in terms of nominal GDP, is a country of concern today. The recent leadership changes from the most controversial leader Berlusconi to a technocratic leader Monti, Italy is expecting an immediate solution to its economic imbalance and the rising unemployment issues which is continuously decreasing the consumer demand and is a big concerned to the EU leaders.
The heyday of the EU is significantly unimportant today as the huge financial damages the union is suffering has become a serious burden. Though its leaders are profoundly focusing on grand strategy to pitch a sustainable solution to the collateral damages, even Paris and Berlin could not reach in a conclusion how to tackle this biggest financial cost ever since its unification. The issue of containment has become a huge debate among the EU leaders as the eurozone is enormously failed to make a mark on its diplomatic policies. So, the financial price of diplomatic disintegrity has triggered its economy down and member countries are trying to calculate the cost of the relationship damage which analysts describe ‘very unsystematic’. Though the United States is preparing for a painful adjustment to shape the economy, but the question of recent bond crisis and longstanding instability of sovereign debts of some of the member countries are constantly a matter of ambiguity. The financial irregularity and the fiscal irresponsibility are factors of growing concern today and the PIGS (Portugal, Italy, Greece and Spain) countries have recently revaluated the price of risk. Mr. Monti’s “rigorous consolidation” of its public finance may not yield an immediate result and Ms. Merkel’s ‘can do speech’ “we will do everything to defend the euro” does not tell how to do it.
As diplomatic issues are concerned, the litany of diplomatic failures in Europe should be analyzed carefully and the financial impact must be conceptualized. The political storm in the Arab spring and diplomatic pressure in the Middle East are growing concern today for the whole world, and Washington, Berlin, and Jerusalem are trying hard to make a move. Tehran’s tremendous move and increasing power could be a difficult task for the NATO and Europe and should well be prepared for the price of the consequence. The recent Palestine bid at the UN is still questioning about the peaceful solution. So, the authorities should calculate the cost of both diplomatic damage and financial mishandled before they face another critical crisis which could have unintended consequences.
N.B.: Foreign Debt per person and GDP and Foreign Debts, Source: Bank for International Settlements, IMF, World Bank, UN Population Division http://www.bbc.co.uk/news/business-15748696