What does the European financial crisis have to do with employment law? That is somewhat like asking what does unemployment have to do with employment law. The issues remain the same, but the volume and context will change.
Here’s a novice’s view of economics involving only three dominoes: 1) the European Central Bank does not intervene in the next 3 to 6 months to aggressively free up money in the European markets so Spain, Portugal, Ireland, Italy, Greece, and France can manage their debt; 2) the European Union collapses; and 3) the world moves into a 5 year economic depression. An extreme and far-fetched scenario? Irrelevant to your personal bread and butter issues? “No” to both questions.
Last week, even as he floated bonds on the open market, the Treasury Minister of Spain said Spain was shut out of the private money markets by high interest rates—in effect, the premium attached to the high risk Spain would default on its debt. Spain is Europe’s fourth largest economy. Spain and Greece have lousy histories overall of repaying their “sovereign debt,” that is, government owned debt that it sells to foreign investors to be repaid in U.S. currency.
This “going to market” approach won’t work for countries like Greece, Italy and Spain, where investors see that the electorate, fat on social programs, rebel against new austerity programs. Logically, foreign investors see the risk is too high.
We are now at an economic cross-roads. In the window of about 3 to 6 months, the European Central Bank, together with the International Monetary Fund and the European Commission, will take the necessary aggressive interventionist steps to increase the influx of euros into the monetary system and to guarantee deposits in member banks, or the European Union will not just fail, it will disintegrate. I know, this sounds like “the sky is falling!” but in the ripple effect of the economy, ask how many of your personal acquaintances have remained long term unemployed and how many have been “upside down” for how long, and still living in their homes even as the banks carry the inventory of defaulted mortgages?
The European Debt Crisis has been a “continuous crisis” for nearly three years. The current phase is just that—a worsening of the continuing situation. There have been 5 new governments elected in Europe in 18 months. Portugal’s will be the sixth this month. Each new government is elected make the electorate “feel better,” that is, relieve them of the hardships of economic austerity measures.
So there’s the set-up to a bad joke: Socialist governments are being elected in a time when strong capitalistic measures are needed. Add to the mix that after three years of squeamish intervention, time is about to run out. If the European Union does not manage the crisis now, its reason for being will cease. It was to be a unified, central economy. If it cannot perform that function for its member states, the members will leave the Union, or be ejected. Multiply “Spain” by 12 to 18, to see the impact just one year.
Pulling the economic levers requires a strong and committed central banking authority given the freedom to act quickly without a continuous meeting of European leaders. That mechanism is in place through the Central European Bank, that should act now to provide quick liquidity to the system, while setting austerity measures that are no so severe as to cause political uprisings. There will be plenty of personal economic pain to spread over the next several generations.
Last month’s U.S. economic news was dismal, with indicators we are going the wrong direction in the so-called “recovery.” The U.S. Treasury and Fed are again saying more intervention is needed. At the same time, we are about to be hit with major tax increases at the end of this year.
All this spells increasing unemployment, more layoffs, and more risk to the “marginal” that they will be selected for layoff because of their age, gender, religion, medical history, disability, race or national origin. Layoffs are legitimate economic responses to hard economic times, but they are also covers for the practice of “cleaning house” of persons in “protected categories.” I can live without the extra business. Let’ s pray the European Central Bank acts decisively for the good of all in the next few months.