Flying Too Close to the Sun: How an EMU Expulsion Provision Will Prevent the European Sovereign Debt Crisis from Becoming a Modern Day Greek Tragedy

Article excerpt

  I. INTRODUCTION
 II. THE HISTORY OF THE EUROZONE
III. THE DEBT CRISIS
     A. The Stability and Growth Pact
     B. The Advantages of Eurozone Membership Cause
        Imprudent Fiscal Behavior
     C. The Contagion Effect
 IV. SOLUTIONS TO THE EU DEBT CRISIS
     A. Why an Expulsion Provision is Necessary
     B. The Removal Process
  V. CONCLUSION

I. INTRODUCTION

There is a Greek myth that tells the tale of Icarus and his father, who flew out of their prison in Crete on wings made of feathers and wax. (1) The story goes that before taking off, Icarus's father warned him not to fly too close to either the sun or the sea, but to keep on a straight path. (2) Icarus, giddy with excitement from the sensation of flying, ignored his father's instructions and flew towards the sun. (3) Eventually, after Icarus's wings began to melt and he was no longer able to fly, he fell into the sea and drowned. (4)

Icarus's tale is meant to serve as an example of what becomes of those who succumb to hubris, the fault of pride and overconfidence. (5) And though the myth is ancient, its warnings are still relevant today. Modern Europe, giddy with the influx of economic advantages attained after the creation of its monetary union, could not control its fiscal policy, and flew too close to the proverbial sun. (6) Now, as the wings of economic prosperity and stability are melting away, it must find some way to keep from drowning. (7)

Europe finds itself struggling to maintain its large economy while many of its founding members, namely Greece, Spain, Portugal, and Ireland, are bogged down with massive amounts of debt. (8) The dream of a common currency began when European leaders attempted to reconstruct the pieces of their war-torn continent and ensure, through economic unity, that such a catastrophe could never happen again. (9) Although this plan has successfully prevented any further military conflicts, it has created economic conflict: all countries in the Eurozone share a common currency and therefore are all economically tied to one another. The collapse of one could pose a disaster for all the others. (10) Greece finds itself facing default yet again, and its numerous bailouts have proven unsuccessful. (11) Other EU Member States, notably Germany and France, have been forced to pour billions of euro into failing Greece, causing their own credit ratings to fall. (12) Despite the bailout, Greece still finds itself unable to meet its upcoming debt obligations. (13) Faced with political backlash at home, some European leaders are now starting to ask whether Greece should be removed from the Eurozone. (14) Currently, the EU framework does not provide for a means of expelling a country from the Eurozone without a concurrent exit from the entire Union. (15) Therefore, an amendment to the Treaty on European Union (TEU) is necessary before any country can be expelled from the monetary union. (16)

This comment argues that an expulsion provision is necessary because of the nature of the national governments, which habitually overspend and accumulate large debt bills. (17) An expulsion provision may be the only way to prevent the debt contagion from spreading across Europe and potentially damaging the viability of the European Monetary Union (EMU) project. (18) Additionally, the provision is still necessary even if the amendment process is too long to solve the Greek crisis. The European Union is continually expanding its borders to include developing economies, and is no longer a conglomeration of similarly built, strong, Western-European nations. (19) The Union now represents the third-largest people group in the world, with an assortment of differing languages, cultures, political views, and religions. (20) This diversity brings additional challenges, especially in the area of fiscal planning. (21) A one-size-fits-all approach to monetary policy is becoming harder to attain, and as a result, there is a higher incidence of violation of the debt thresholds set forth in the treaties. …