Debt Crisis: Europe Postponing Day of Reckoning?

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BRUSSELS -- European leaders keep making happy talk about the region's debt crisis, leading the public to believe the worst is over. But it isn't.

Billionaire investor George Soros said recently the European debt crisis "is getting worse" and "could even destroy the European Union."

Death of the Eurozone

A credit downgrade here, a loan guarantee there -- what some economists believe will be the eventual death of the eurozone has been dragged out for months and even years like a long terminal illness.

The European Union is trying to erase huge deficits through cutbacks in government spending. But tat is only causing riots and making the deficits bigger.

Because the economies of nations like Greece are weak, the governments aren't bringing in enough money in taxes to help pay their bills.

Economist Peter Morici had this advice for Europeans on how to fix this mess.

"Dissolve the euro for starters," he told CBN News.

Morici said the euro currency itself is the problem because its design is fatally flawed, and no bailouts or austerity programs can overcome that.

"The euro was supposed to increase prosperity, and instead it's impoverishing these countries," Morici explained.

"These governments don't have the latitude they need to make economic policy and as a consequence they're failing," he continued.

Fatal Flaw

The euro's fatal flaw, in a nutshell, is that it is a one-size-fits-all currency for a many different countries with very different economies.

That hurts relatively weak economies like Greece. Unlike the U.S., they can't just turn to the Federal Reserve for help because whatever helps Greece might hurt other countries in the eurozone.

Consequently, nations like Portugal, Spain, Italy, and Greece are trying to fight a war against debt without the weapons they need to win. Just getting loans doesn't help since that's trying to fight debt with more debt.

Making matters worse, the euro currency was launched without an exit strategy in case it failed.

"I think the eurozone is trapped," French economist Nicolas Lecaussin told CBN News.

Lecaussin warned that trying to leave the euro now would be a fiscal disaster for France.

"If you leave the euro, what are you going to do now? Do you choose the franc? Even Greece is not choosing the drachma because it would cause a fiscal collapse," he said.

But Morici said Europe could and should just give up the euro, even if it causes short-term financial chaos because it's already on the road to ruin.

"Europe could easily slip into Great Depression-type conditions," he warned. "In Spain, it's already near there."

And a depression in Europe certainly wouldn't be good news for a fragile American economy.

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CBN News
Dale Hurd

Dale Hurd

CBN News Sr. Reporter

A CBN News veteran, Dale Hurd has reported extensively from Western Europe, as well as China, Russia, and Central and South America.  Since 9/11, Dale has reported in depth on various aspects of the global war on terror in the United States and Europe.  Follow Dale on Twitter @HurdontheWeb and "like" him at