It's not as though commentators all cheered the $1 trillion EU bailout plan to begin with. Now, just one day later, they're really skeptical. Most analysts following the European saga have decided that the plan is not going to solve any long-term problems, and may in fact exacerbate them. Here's why:
- Transfers Risk from State Finances to 'Global and Social Politics,' argues Paul Mason for BBC News. With the bailout, "not only is the EU now committed to much stronger fiscal ... oversight. It is now implicitly committed to becoming an economic super-state." The problem is that "big states have bailed out little states and will demand reforms that change the lifestyle of people in these states forever. Northern Europe has effectively seized control of southern Europe." But are Europeans going to "accept the consolidation of the eurozone, with the loss of economic sovereignty that represents?"
- New Austerity Measures Scrap the Social Contract in Southern Europe The Washington Post's Howard Schneider calls the bailout "a political gamble with an uncertain outcome: that European governments will rewrite a post-World War II social contract that has been generous to workers and retirees but has become increasingly unaffordable for an aging population." In Italy, Greece, and other struggling southern European countries, "unions and socialist movements have established generous work rules and social welfare programs."
- And That's Why the Markets Are Reacting Badly "Confidence in the plan lasted only a day," notes a grim Douglas McIntyre for 24/7 Wall St. The reason lies in anxieties over social unrest:
The market now fears that if Spain and Portugal get Greek-like packages, that their leaders may approve the packages, but that this will only be followed by national unrest. People who have enjoyed the benefits of free-spending governments which have provided entitlement programs will fight to keep them. They will also work to keep their underground economies and ability to dodges taxes in place.
- 'If Solidarity Goes, Europe Goes' sings The New York Times' Roger Cohen in a particularly dark column. He calls German chancellor Merkel's "delaying tactics ... shameful, costly--and revealing." Germans are now wary of solidarity, even though "European solidarity was once Germany's route out of post-war shame." The "core problem" here is that "the euro has bound vastly disparate nations in a halfway house where monetary and fiscal policy are not under unified direction" without solidarity, that problem is only going to get worse.