The member states in the economic and monetary union of the Euro seem to be hesitant in bailing out the member that finds itself today heavily indebted by over than 400 billion Euros, namely, Greece. But on the other hand, these countries are seeking to devise some kind of a body, perhaps in the form of a European Monetary Fund, to assist defaulting members in the future. This comes as a result of the complications caused by the terms of the Maastricht Treaty in 1992, which did not establish any official body that can bail out any member that becomes beleaguered by deficit. In truth, acute financial and economic crises often prompt the global regimes concerned to plan new systems and mechanisms, with the help of which potential crises can be avoided. Also, the underlying causes of these crises might evolve and mutate, in a manner with which it becomes hard to avoid their repetition, akin to when pathogens develop resistance to antibiotics. When this happens, for instance, pharmacological sciences seek to develop and test new drugs against them. Similarly, perhaps one of the good outcomes of crises is that political regimes are pushed into formulating more stringent economic monitoring mechanisms and into subsequently seeking to plug any loopholes that hitherto allowed fatal collapses in the financial and economic systems. In the aftermath of the global crisis, whose repercussions the G20 managed to keep in check, and following the quest by other blocs and countries to immunize their economies against any potential future collapse, a crisis emerged in the Euro zone, which had only finished its first decade of integration. This nascent region is currently undergoing a crisis that it did not anticipate, and for which it did not envisage pre-planned solutions. This is because the Maastricht Treaty, which established the rules and regulations of the Euro area, and the mechanisms of dealing in a unified European currency, did not provide for the possibility of a member state defaulting, and consequently, threatening the new currency. Despite the different and divergent economic levels among the member states, the Maastricht regulations led to convergence among them, within criteria which, while they could be feasible during periods of economic growth, are not possible during sharp crises. These criteria are clear; the level of inflation, for instance, must not exceed its lowest level in three other member states by more than 1.5 percent. Also, the budget deficit for each member state must be lower than 3 percent of the GDP, while the public debt must not exceed 60 percent of the GDP as well; in addition, interest rates must not exceed the three lowest levels of interests in three member states by more than 2 percent. Moreover, the Maastricht Treaty obligated the states willing to join not to devaluate their currencies in the two years preceding their accession. The regulations established by the Maastricht Treaty in terms of ‘economic coexistence', go beyond what the adoption of a unified currency stipulates in terms of economic and financial transactions - that vary among the member states. This is because the adoption of unified currency necessitated uniformity among inflation rates among the different members, in addition to countering the fact that high budget deficit in any member state will damage the value of the unified currency and hence, the economic integrity of the euro area. However, complying with such conditions is difficult during severe crises. During economic downturns, for instance, economic stimulus necessitates overlooking the public deficit; however, the Maastricht regulations pushed the European countries in the euro zone during the 1993 economic downturn into ineffective and restrained economic policies. These thwarted the economic growth of these countries, before the end of last decade. Aside from all these regulations stipulated by the Maastricht Treaty, the selection of the member states itself was not done on a sound basis. For instance, the countries of southern Europe had a strong desire to accede to the Euro area, in order to incur some economic benefits by exploiting the low interest rates, and also achieving political gains, thanks to the accession of countries that were marginalized in the past, into the European structure. This is not to mention the bid to entrench democracy in the countries that have recently broke free from dictatorial regimes (Alternatives Economiques – March/2010). In truth, the low interest factor played a fundamental role in attracting countries into joining the euro area, with the help of pressure from basic member states. These countries sought to help their economical agents (government, corporations and families) benefit from interests that cannot be adopted locally, while these countries also benefit from converging inflation rates, in order to steer prices downwards. Paradoxically, if price levels in Greece, with 1997 as a base year, were the equivalent of one hundred percent, then this level has reached 146 in 2009, while it reached 139 in Spain, 122 in France and 119 in Germany. It was not possible to address this increase in prices by adjusting interest rates, given the fact that the European Central Bank determines a unified interest rate. For the sake of comparison, Germany had the lowest interest rates prior to the euro, unlike Greece, Ireland and Spain, as the inflation rates there were higher than their equivalents in Germany and France, despite the fact that these countries had years of negative interest rates. In truth, some of the positive outcomes of inflation are the fact that it dissipates the debt of some countries, their institutions and their families, while prompting the monetary authorities to set interest rates according to the growth rates of inflation, and often for economic motives. But with the adoption of a unified interest rate across different economic entities, and in light of a crisis that led to the inevitable obsoleteness of the Maastricht Treaty, deviation occurred and led to the present situation: As Greece got into more and more debt, it hid the truth about this from Brussels with the help of the American group Goldman Sachs, while in Spain, Ireland and Portugal, families, institutions and private customers stacked loans, until they became replete with debt. Compared to the ease in obtaining loans, the citizens of these countries no longer saved their incomes. They started consuming more than they were producing. And with the bottomless gap of foreign deficit widening further, reaching 12 percent of the GDP in Greece, 10 percent in Portugal and 9 percent in Spain, the crisis took place. In general, excessive debt leads to the loss of competitiveness in many countries. Furthermore, it is difficult to address this problem in the euro area. Previously, it was sufficient to devaluate the currency to correct the situation, and although the people found themselves suddenly poor, they became more competitive compared to others. While devaluating the currency was a harsh measure, it was not back-breaking, and it equated everyone together. Hence, the gamble here is on the ability of the European currency to survive. The Greek crisis may have awakened the member states regarding the underlying risks, which they may be able to avoid by establishing a regional monetary fund.
