Laying down all the possible reasons responsible for European Debt Crisis, one could not
easily think of the reasons lied within the social strata of European countries (for now take Greece). We should be thankful to Ruchir Sharma- the author of Breakout Nations, in which he has proposed his theory on society. He says there are two types of societies in the world. One, high-context societies and two, low-context societies. According to him and further analysing his theory, the people of high context societies are lazy. They love their "glorious" culture and history than themselves (or their bf/gf)(sounds like EPF/PPF). Most of the people of high context societies are philosophers (because they are lazy. They get so much time to think). If not philosopher then writer. (Again the work can be done just by seating a side and thinking on the grass). If latter is not possible then by hanging shabanam which contains packet of cigarette (filled with a cigarette or two) (and two books with intricate names so that no one can understand) on the wicked shoulder and calling themselves social activist. And the last resort is being politician. On the other hand, low-context society's people are workaholic with balanced emotions and controlled behaviour.
And Greece is a high context society (Unfortunately yes, India is also one of them.) The reason behind fall of Greece's economy is lied in being high-context society for a long time. As the people are lazy, they want to get rid off with 10am-7pm boring jobs. Therefore they prefer to take retirement at the age between 50-55. On the other hand the average retirement age of Germany is 80 years. (and hence it is a low-context society). Now one could ask how this secondary things can hit economy of a nation so bad. It is as simple as the above question can be asked. If you retire early, your country's working class will be looking forward to pensions and tax exemptions. This is resulting in deterioration in span of working class and subsequently in taxes.
The Greece's Case:
The same has happened in Greece, working class was deteriorated. Government was running through fiscal deficit. But due to popular policy formulation (raising pensions, bringing down tax slabs) to get elected/reelected it had to went through fiscal deficit. Unfortunately there was socialist governments in Greece's fate i.e. Higher spending on "social welfare". But due to shortage in money to expend Greece has to borrow it. This was just a rattling. Now we will look back in the history of Europe.
History:
European history is mainly a war history. Due to successive wars the steel industry of the Europe collapsed. Now take an example, as steel industry was collapsed of some European countries due to wars. One country has to to import it from another country. But Europe
was always continent of great barriers, tariffs and different currencies. So suppose the price of a piece of steel is £100 in the country A and country B is importing it. Then due to addition of exchange fee, tariff fee, local body taxes of both the countries, the price of the same piece will go up to £150 i.e. 50% dearer than country A. The fact is Europe is diversified continent but not it's countries within themselves. Now take an example of India which is more diversified country (not continent). If a resource is available in the state Maharashtra, not necessary it is there in Orissa (due to different geographical conditions) and vise-a-versa. If Orissa want to buy it, there will be no high tariff barriers. That is low tariffs addition, low price. Therefore there will be slight negligible change in price. This is not possible in Europe. (That's why I agree with Mr. Tharoor, British owes reparations). Was there any solution?
Yes. The European Union.
Unified Europe - European Union:
To eliminate this tariff and exchange fees barriers 27 European countries came to an agreement to form a common monetary policy unit through Maastricht treaty. It was
resulted in formation of ECB (European Central Bank). Now smaller countries had had access to credits like never before. It made these countries vulnerable and forlorn to ask for more credits. As we discussed that countries like Greece were all eager to spend on welfare (despite of lower working class and lazy people) and lending each other, thought economy was working efficiently with "collective faith" and "interwined system". But it backfired like anything. Greece and other small countries kept borrowing money from ECB and other countries, and simultaneously kept spending on the social welfare. As it's working class was small as compared to retired and pension sponger class, fiscal deficit puffed as never happened before. Greece was declared bankrupt. Further digging their own grave, these countries started borrowing money from another to pay debt of one. The piling of debt worsened the condition of these countries. Credit flowed dead accumulated making European countries tightly intertwined. (See images to get it clear.)
Germany was ready to pay the debt of all the bankrupt countries to save the Union. But with the only proviso of "Austerity Measures". i.e. cutting spendings and raising the taxes. It seems very simple option. But it's not. No government wants to cut spendings. If it cuts spendings, it has to cut earnings of it's many citizens. It was not so feasible because government collects tax on people's earning. Cutting the salaries-cutting the jobs, means low revenue collection. These countries have a terrible problem. They never collect all the taxes imposed on the people. So they never could.
What the f*** was the reason?
Cultural Differences.
Being in High-Context societies.
What was/is the solution?
1) Fiscal Union (Common Fiscal Policy):
It could solve the problem, but it was like surrendering country's sovereignty to the higher power.
Not working.
2) Strictly obeying Austerity Measures:
Problem we discussed already.
3) Dissolve European Union:
Prestigious Issue.
जान जाए मगर शान ना जाए.
4) Throw out these countries.
Bad brotherhood.
5) Brexit, Grexit, Germxit and blah blah.
Can solve the problem?
6) Cultural Revolution:
Possibly Yes. (But not like China, we need one like Japan)
Final Solution:
Thomas Piketty.
You can watch it here:
https://m.youtube.com/results?q=European%20debt%20crisishttps://m.youtube.com/results?q=European%20debt%20crisis
