Euro in Trouble as Greece, Spain and Portugal Fight Economic Collapse

Greece, Spain and Portugal are in big trouble and the credibility of the euro is in trouble as a result. Greek leaders were given one month, February 2010, to slash out-of-control public spending and come up with a convincing austerity plan. Panicked by the spectre of economic collapse, the European commission stepped in to demand urgent action to save the Greek economy and protect the euro.

EU economics commissioner, Joaquin Almunia said:

"The huge imbalances [in] the Greek economy are not sustainable in the long run. The fact of the matter is that markets are putting on pressure. This pressure cannot be ignored."

EU demanding urgent economic improvement from Greece, Spain and Portugal

EU concern bordering on hysteria spread to Spain and Portugal, two other eurozone countries where public spending is out of control. Both countries have become steadily less competitive since joining the euro.

George Papandreou, the Greek Prime Minister, is raising fuel tax and freezing public sector wages to prevent economic collapse. But Brussels, Germany and the European Central Bank say the measures are not enough to save the Greek economy. The EU is worried that other 'Club Med' nations in the eurozone will continue to spend profligately if Greece is not whipped into line as an example.

First use of new powers made legal by the Lisbon Treaty

Consequently, EU officials are using new powers under the Lisbon Treaty to restructure pensions, health provision, job markets and commerce and the Greek government will be made to report progress monthly to the European masters in Brussels and accept any measures they may impose.

Almunia admits, or boasts perhaps:

"This is the first time we have established such an intense and quasi-permanent system of monitoring."

"The EU has made Greece into an 'economic protectorate' "

Some Greek voices on the left say Brussels has in effect taken Greece over as an economic protectorate. However, the EU may ultimately find it has no choice but to call in the IMF to aid and restructure the Greek economy.

Greece's labour unions responded to the EU's action by calling a general strike on February 24 and it looks as though there is battle ahead. Greeks are unwilling to take the living standard cuts demanded by fat cats in Brussels, who are these days exceedingly fat and not subject to control themselves. The EU's own accounts have not been approved for years and the eurocrats are shameless despite constant talk in Europe about abuse of the vast sums of taxpayers' money they handle and abuse of expenses.

The German government - which has the economic clout to save the Greeks - is doggedly refusing to help, seeing no reason why it should suffer because Greece has overspent. And the German people are unwilling to bail out another nation even if it is a southern neighbour.

Spain meanwhile has a budget deficit running at 11.4pc and one of its largest banks, BBVA, announced a 94% drop in profits for 2009. Spain's mortgage association has said the country's real estate sector is 'bankrupt' and four million Spaniards are unemployed. It may not be long before the EU deploys its new powers and its Greek austerity policy in Spain.

As Brussels imposes austerity on Greece to save the euro, will Spain and Portugal be next?

So as Eurozone cracks are widening between the richer nations and their poorer neighbours, the Eurocrats in Brussels are cracking the whip. One banker has likened the situation in Greece to the days before the failure of Bear Stearns and Lehman Brothers in 2008. Except that in this case a country is involved, not a couple of banks. It's too early to say whether Greece, Spain and Portugal will take the lashing or not, but the future of the euro depends on the outcome of this clash between these European 'regions' and the bureacratic centre.