Europe is regarded as the world’s ‘ethical force’. Today, however it is in danger of losing this important title because of its immoral choices in tackling the debt crisis.

By Grigoris Nikolopoulos

The debt crisis itself is a financial and foremost an accounting issue which can of course produce huge problems if not dealt with correctly. Frighteningly, the so called ‘cure’ that Europe has in mind, is more dangerous than the debt crisis itself. It has caused an international crisis in confidence which will eventually form into a moral and political crisis.

I will explain what I mean.

In order to do so, let’s have a look at certain examples of what has in fact gone wrong in Europe’s policy. These are set to reduce Europe’s credibility and will result in Europe losing its most important asset: its moral superiority.

The first is the haircut in Greek debt. Can Europe really declare that Greece is a unique case and that other countries will not follow such as Italy, Spain and Portugal and if indeed further bond haircuts are not on the horizon? If you were the ‘markets’, i.e. had a position in the European bond market, would you actually feel safe after the Greek haircut? Would you keep your other European bonds? Or would you buy into safer markets since Europe has already chosen the way of the haircut?

Although bondholders may agree to the haircut, they are all forced into it through Europe’s threat of the alternative; losing the full value of their bonds.

And if that’s not enough, Europe goes on to state two completely immoral facets, these being that ‘individual bondholders will lose out whilst the European Central Bank will not participate in the haircut and therefore will not lose out’.

Who loses and who does not? Is the criteria based on who is the most powerful? Is the power based on respect as moral strength? And if this is the case, for how much longer must we bow to this respect if it is immoral?

And finally, Europe waves her magical wand and doesn’t activate the CDs, despite Greece’s bankruptcy. However you view this point, those who have invested in CDs have invested in (the unlikely at that time) bankruptcy of a European country. These have to be paid, for the alternative instills a lack of confidence in the market’s institutions. And the markets are based on one thing: trust.

All of the above make today’s Europe arbitrary, certainly unethical and possible illegal.

The markets will aggressively attack European bonds in the case that the Greek haircut goes through. And this will be the reasonable response. What this means for Europe however, is that when it goes to the markets to borrow money, it will not be trusted.

There are however other sources of ‘European immorality’.

For example, Europe is pressurizing other countries who are participating in the IMF to raise the money that they pay on an annual basis to the IMF in order to support European economies.

So the question is, will poor countries like the Sudan, Mozambique, the Ivory Coast and Turkmenistan will pay more in order to support Greece, Spain, Italy and Portugal?

This is hugely immoral and will lead to Europe losing its reputation as this planet’s ‘moral leader’.

All of these European failures are due to Europe’s lack of enlightened leadership.

This in turn opens up a dangerous historical road which leads to global political and economic crisis.

 The only solution

 Europe’s alternative course of action should involve printing more money to meet the obligations of its members who cannot pay.

This is in fact, the only proper and moral solution. If Europe prints money, bondholders lose a percentage of their bonds’ value in terms of the euro’s depreciation. At the same time, Europeans also lose out, even more, as their currency, income and savings depreciate. However, social justice in Europe stabilizes for instead of millions of workers losing their jobs as well as other factors, losses are shared fairly.

The only alternative option for Europe would be a co operation with the IMF and the global community in order to entail a unanimously agreed upon global haircut (i.e. of global debt) of 20, 30, 40 or 50% as needed. This would mean that not only Greek bonds are treated in this way today, Italian bonds tomorrow, but all bonds, including American and German ones too.

These two solutions – the first printing more money, the second involving a global haircut – will be on the drawing board anyway in the next few years. Europes hesitation in following these solutions now and dealing with this problem correctly, is just adding to the crisis at a great cost.

Unfortunately, Europe has gone down the wrong road and will emerge from this crisis for the worse.

Europe will no longer be considered as a moral force but a dangerous, insolvent and arrogant region of the world, a world which has already focused its attention on the Far East. Europe has the reputation and the Far East, the spoils. Soon Europe won’t even have its reputation.