Letter: The Euro-zone provides us with a good example of a reversal of fortune

The Euro-zone, rather surprisingly, provides a good example of such a reversal of fortune.

The Euro-zone sovereign debt crisis of 2010 led to several EU countries becoming virtually insolvent. They were known collectively by the pejorative acronym – the PIGS - being shorthand for the profligate economies of Portugal, Italy, Greece and Spain plus the ‘Celtic Tiger’ which had also crashed and burned due to reckless property speculation.

Greece became the poster boy for wasteful extravagance with 16% debt at the height of the crisis.

The unfortunate supplicants were eventually given bailouts and stern reprimands by the more efficient, more affluent and frugal northern Euro member states led by Germany.

This act of ‘generosity’ was motivated mainly to help the laggards to repay banking sector loans and thus avoid the heavily exposed EU banks having to take a hair cut on this debt.

However, fast forward to 2024 and we find that the two biggest EU member states, France and Germany - the so-called ‘engine’ driving the Euro-zone, are marooned in political paralysis and economic stagnation.

Indeed, France’s borrowing costs now exceed Greece on the debt markets.

France is facing the future beset with precarious public finances, no budget, a caretaker government and zero growth.

The much admired German automobile industry is crippled due to the high energy costs resulting from the war in Ukraine, a very well remunerated labour force, a slow transition from internal combustion to electric vehicles (EVs) and intense competition from the Chinese in the EV market.

But, this downturn is not universal in the Euro-zone. The so-called Mediterranean stragglers have staged a remarkable recovery. Indeed, an assessment of the performance of Euro-zone economies by the Economist magazine using five economic and financial metrics (GDP, stock market performance, core inflation, unemployment and government fiscal deficits) revealed that Spain, Ireland, Greece and Italy were in the first four places!

Spain generated annual growth in GDP of 3%. Ireland is now awash with cash. It produced a healthy windfall fiscal surplus due to a multi-billion dollar corporate tax back payment from Apple.

Portugal achieved a rare budget surplus via fiscal discipline. Joblessness rates in Greece, Italy and Spain have fallen to the lowest in over a decade.

We must, nevertheless, add the caveat that these results are probably ephemeral and unsustainable.

Yet, we must consider the parable of Jesus and the woman accused of adultery for which the punishment per Mosaic law was stoning. He teaches instead, “let those that are without sin cast the first stone”.

To extrapolate this command to the Euro-zone example – “let those that are without debt seek redemption”.

George Workman, Donabate, Co Dublin