As Portugal, Ireland and Spain gaze on, Greece approaches a moment of truth. Should she default, their bonds, too, will plunge in value out of fear of a copycat default, and the interest rate they pay would also rise. They, too, might then take the Argentine road.
The EU's crisis would then be like a crisis in the United States should California default on its state bonds and interest rates on other municipal bonds surged to double digits.Is there a way out?
One option is for the EU to bail out Greece with a huge loan. But if Greece cannot meet her debt obligations now, how could she pay back the loan? And if the EU cannot compel Greece to make deep budget cuts today, what leverage would the EU have after bailing out Athens and removing today's pressure on the government?
A second option is to call in the International Monetary Fund, which imposes tough conditions on nations receiving IMF loans -- the Third World therapy. But problems would arise here, too.
First, it would be an admission that the EU cannot manage its own household. Second, the largest contributor to the IMF is Uncle Sam.
Why should America bail out Greece, when the EU is larger and richer and did not help bail out California in 2009? The stimulus bill did that in 2009, to which Europe contributed nothing.
Where Greece is at today, however, we shall all arrive tomorrow.
In every Western nation, government is growing beyond the capacity of taxpayers to bear. Deficits and debt are surging. Not enough children are being born to replace parents. The immigrant poor who consume more than they contribute are coming to take the empty places. Seniors and elderly are growing as a share of the population. Companies are saying goodbye to the West and moving offshore to low-wage lands.
The West begins to look like yesterday, while the East begins to look like tomorrow.
The West is approaching a crisis of solvency and of democracy. We shall see if democracy, which grew popular lavishing benefits upon all, is strong enough to start clawing them away. Or will democracy try to keep piling the burden on the producers until they rebel or depart?