Deuxième partie : Compréhension
WHY CARE ABOUT THE EURO?
Because if the European dream fails, the American one takes a hit too
« IF THE EURO FAILS, EUROPE FAILS. » German Chancellor Angela Merkel has said it many times since the beginning of the euro-zone crisis, as a way of underlining the preposterousness of either idea. Now the words seem like a prophecy. Europe’s much anticipated and much delayed euro rescue has yet to fully materialze, as European leaders squabble over who will have to eat the losses on Greek sovereign debt : banks or governments. It almost doesn’t matter, since there’s not enough money in the rescue plan to both recapitalize Europe’s banks and support the debt of all Europe’s weaker countries like Portugal, Spain and Italy. Meanwhile, the Italian government is close to collapse, Greece’s bondholders – not to mention its citizens – are close to revolt, France is close to a downgrade, and hard-line Germans, who’d like to see the euro zone unravel just to spite Merkel, are close to extracting defeat from the jaws of victory.
YEAH, WHATEVER, YOU ARE THINKING. The euro zone story seems far away, ponderous and impenetrable. Much of it is told in acronyms (the ECB and the EBA meet to discuss the EFSF), and worse yet, the drama takes place in bureaucratic Brussels, a city frequently ranked the most boring of Europe. Still, pay close attention to Europe, because a broader disaster is in the making ; Here’s why. First, the euro crisis could start another global financial crisis. European banks hold about $55 trillion in assets – more than four times the amount held in the American banking system. And given that 80 % of Europe’s increasingly dicey debt is held by European banks, it’s no surprise that the banks are in trouble ; Many are struggling to borrow enough money to run their day-to-day operations. One giant Franco-Belgian institution, Dexia, has already gone under, the biggest bank to fail since the financial crisis.
The question is, to what extent could this infect the U.S. financial system ? Unfortunately, the answer are as opaque as the banking system itself. As my colleague Stephen Gandel has explained on Time. com, U.S. bank losses could range from nearly zero to more than $2 trillion, depending on how well hedged they are against the trouble in Europe. And since banks still aren’t required to report their hedges, there’s no way of knowing whether the U.S. is heading for a best – or worse – case scenario. That, along with the fact that European authorities’estimates of what’s needed to recapitalize their banks are about half what outside experts say is necessary, doesn’t inspire market confidence.
But it’s not just about banking- if Europe can’t grow, the U.S. may not be able to either. The euro zone makes up 20 % of the global economy. If Europe plunges into a serious recession, there’s a good chance the world will too. While it’s possible for Greece to default and be cast out of the euro zone without too much damage, mass defaults of nations like Spain or Italy, or an unordered breakup of the euro zone, could trigger a serious downturn. What’s making markets so nervous (yields on Greek, Italian, Spanish and even French debt are soaring) is that one of those latter scenarios is looking more likely, since the strongest nation in Europe, Germany, won’t commit wholeheartedly to backing the rest of the euro zone’s troubled economies. « The only way forward is for Germany to support Italy and Spain, whatever it takes, » says Harvard professor Kenneth Rogoff, a sovereign-debt expert.
The end of the European dream of integration would be the end of the free world as we’ve known it ; it sounds dramatic, but it’s true (...) While Americans like to think of Europeans as ponderous and ineffectual, Europe has the power to do things- to take the lead in liberating Libya, to push forward efforts to curb climate change, to help the U.S. defend liberal democracy. A hobbled continental Europe means less support for many of the things that Americans hold dear. In that sense, if Europe fails, they do too.
Rana Foroohar, Time magazine, November 7th 2011
Which of these statements best sums up the main idea of the text ?
