Although Europe’s financial chaos shows no sign of ceasing, the events of recent days suggest that there is still hope for a unified European fiscal policy. The welcome subordination of short-sighted political debates in countries like Greece and Italy to the broader economic needs of the European continent is ultimately necessary for the stabilization of the global economy.
In the last week, the world has seen the downfall of the Greek government and an offer to resign from Italian Prime Minister Silvio Berlusconi over Europe’s grave sovereign debt crisis. In Greece, after months of uncertainty and economic upheaval, former Prime Minister George Papandreou’s crass politicking on necessary debt restructuring efforts went too far. Papandreou went against the common European economic policy in a failed quest for political survival. Although his ouster may increase Greece’s near-term political fragility, the long-term effects of the change are positive.
The harsh but necessary austerity measures demanded by the European Central Bank will now be passed by the new unity government. Moreover, the European Union showed a great deal of strength in all-but forcing an economic mandate on an errant member nation that will probably lead to long-term continental benefits. Even though painful measures will now be set up, it seems that at least the ECB’s movement toward a more unified European economic policy has prevailed over the petty interests of one Greek politician.
In Italy, the Berlusconi era is fortunately coming to an end after more than a decade of corruption and polarized politics. His coming resignation will hopefully mark the end of an era defined by political malfeasance that has overshadowed Italy’s cultural and economic vibrancy. Importantly, the continuing instability of the Italian bond market makes it more likely that the Italian parliament will institute Europe’s mandated economic reform.
As the danger of a continental domino effect persists, the ECB and European leaders must ensure that the future of the European community features a common fiscal policy. One of Europe’s hardiest barriers to solidarity is the lack of a unified economic policy for its common market and common currency. As markets fluctuate further and as a long period of economic austerity approaches, the resignations of Papandreou and Berlusconi suggest that for the first time, the European Union is stronger than the governments of its member states. Although these resignations and reforms do not mark the end of economic difficulties, they do represent the necessary first step towards the strong unified fiscal policy that Europe desperately needs.
