The European financial crisis is like a sword of Damocles that refuses to fall. It dangles precariously over the heads of Europe, and beneath them rests the tender flesh of the rest of the world. Greece, Ireland, Spain, Italy, Portugal – sometimes collectively called the PIIGS – are all in a dangerous economic state. This is either the result of extreme sovereign debt, or bubbles within their financial industry.
This past week European leaders came together to arrange a $125 billion package for Spain’s ailing banks. This bailout in no way fixes the problem, but does postpone a major disaster. Prime Minister Stephen Harper was in Europe during this period. In such a time he commented that Europe needed to get its act together and stick to the austerity programme to restore fiscal solvency. I can’t say that the Europeans were too glad to hear theremarks. Perhaps more importantly Prime Minster Harper stated that Canada would not be part of any rescue packages in Europe.
My initial reaction to this was that it made clear sense for Canada to butt out. We had nothing to do with the rise of this particular crisis, the small interventions launched by Europe appear entirely ineffective, and most importantly – Canada lacks the economic muscle to contribute enough to these multibillion dollar schemes. Ideologically, I suppose, I am by inclination a bit of an isolationist. My isolationism is mostly reactionary to the constant call of some to intervene. Every time a dispute breaks out politicians will start calling for Canadian action. To manage the amount of interventions we would need to conscript British Columbia and send them into the field. Obviously my “let the world take care of itself” attitude goes against the grain of a lot on the left and the right at present.
However, watching the CTV programme Power Play, economist and actor Ben Stein pointed out that the IMF was founded for the very purpose of stabilizing Europe. The government’s absolute refusal to be involved in Canada, or to encourage the IMF’s participation seems remarkably short-sighted. Canada’s contribution could be largely symbolic, Australia loaned $7 billion into the process. Canada could do the same for the sake of a little stability.
The only argument for Mr. Harper’s position, I think, is an awfully crafty one. If Canada pledged support the next time a domino appeared to be on the brink of falling the country would be expected to run in and support Europe. The failure to do so could precipitate a crisis. In addition Canadian support (real or imagined) may offer false comfort to European leaders who must find a way to manage the crisis more effectively.
Europe’s collapsing is beginning to feel terrifyingly inevitable. There are only so many holes that can be plugged before the whole edifice breaches and the world is drowned in the twenty-first century’s massive bubble and accumulated state debt. If or when the dam breaks, there will be nothing Canada can do.