What the Hell is Going on in Europe?

Greece is falling apart, and the rest of Europe is torn over how to save it. Our solution? Vladimir Putin.

From London to Moscow, Europe is fretting over the prospect of Greece – and possibly Italy, Spain, and Portugal – collapsing into insolvency, which would threaten the stability of the continent's major banks who have bought up billions in those country's bonds. The New York Times' editorialists take a second to consider Greece's plight, warning that austerity measures proposed by the European Union – higher taxes, slashing social spending – "are guaranteed to prolong and worsen an already severe recession." That will make it next to impossible for Greece to pay off its staggering debt, making a default all the more likely. And if Greece defaults, then the big European banks – primarily German and French – would likely be dragged down with them. The systemic problem is that "Greece’s main political parties heedlessly expanded public payrolls to reward supporters and artificially hold down unemployment," argue the editorialists. Trim some of that fat, redirect that money toward priming the pumps of economic activity, and maybe Greece can climb back out of the hole it dug for itself. That sounds easy in theory, if the government could pass measures with no dissent from the public or opposition political parties. But that pesky democracy has a nasty habit of getting in the way of such supposedly obvious solutions.

Over at The Economist, their anonymous correspondents suggest that the Eurozone countries make a concerted effort to prepare their banks in case Greece does default. Because "sovereign holdings of banks and potential losses on them are well identified," they argue it's easy to figure out which creditors stand to be hit hardest should Greece default. Pump 'em full of money to protect the savings of 'John and Jane Q. Citizen', and presto, you've buttressed the continent's financial system. That's one of the advantages of having lived through the financial crisis of 2008 – when signs point to another one happening, we at least have some modicum of knowledge on how to spare ourselves of the worst. Granted, this would require that Germany and France, who've already spent more than their fair share to keep the Eurozone on even keel in recent years, to fork over even more money to banks. And bailing out banks before they even need bailing out, well, that's not exactly the best way to win votes. But in theory, it should work, right? Right?

Perhaps the Greeks could use a political leader like Vladimir Putin, the Russian prime minister who's set to become president again next year. Katrina vanden Heuvel and Stephen F. Cohen take to The Washington Post to dispel the fear that Putin's return to the top post in Russia will necessarily be a bad thing for both the West and Russia. They contend that the strongman of Russia is ideally suited to diversify the country away from its dependence on oil and natural gas and "find other sources of revenue for its growing budget" (i.e., raising taxes) because only he has the political capital to enact such unpopular changes. Putin's even said Russia should prepare for some "bitter medicine." The current prez, Dmitry Medvedev, might be more popular among Western leaders for his more liberal-democrat leanings, but Cohen and vanden Heuvel remind us that "it was Medvedev who took personal credit for using military force against Georgia in 2008 and then increasing military spending so sharply that his widely admired finance minister, Alexei Kudrin, resigned last month." So maybe Putin's return to the Kremlin won't be such a bad thing. At least we can count on dozens of more amazing photo ops.

Photo courtesy of Reuters