Europe's economic woes

The continued economic tensions that are rattling the 17-member Euro zone are raising the stakes on the future of the European integration project called the European Union.The economic and financial crisis in the European Union has widened the gap between the ordinary citizen and the bureaucracy based in Brussels reinforcing the view that the EU is a project of the elites.The man on the street in Berlin, Brussels, London and Paris is at a loss to understand the complexities and the rules and regulations of the Eurozone financial mechanism.Terms like bank stress tests, bank recapitalization, global financial tax, European Globalisation Adjustment Fund (EGF ) six-pack legislation on economic governance, European Stability Mechanism (the ESM ), European Finance Stability Facility ( EFSF), etc., leaves them more perplexed than better informed.Analysts say that European leaders have failed to explain to a wider public what is happening to Europe and the euro which has led to an erosion of their credibility in the eyes of the public.As a result, rating agencies and financial markets have emerged as the real forces controlling the economic situation in Europe and not the state or the governments.One threat by a rating agency to downgrade a bank or a country is enough to throw cold water on reassuring statements and moves by political leaders to restore economic confidence.The case of the Franco-Belgian bank Dexia is a stark example of this. A week ago the rating agency Moody's s threatened to downgrade Dexia and the bank is now on the verge of collapse.If this happens, analysts warn, it could usher a series of bank failures throughout Europe."Today we are not simply faced with need to restructure the banking sector, the market credibility of sovereign states is now at stake" commented French daily Les Echos."The restructuring of Dexia will have a major impact on the credibility of the member states concerned," it noted.Greece is another case which shows that the grand EU vision of binding peoples more closely through economic integration and raise living standards has failed.Many Greeks are now blaming the EU for their miseries and want to leave the Eurozone and return to their currency Drachma.EU governments and leaders are also being criticised for quickly funding troubled banks with billions of euros but at the same time imposing unpipular austerity programmes on member states and citizens.As European capitals wrangle over how to deal with the crisis in Greece, Ireland and Portugal, which have been forced to accept a stick and carrot plan of bailouts and austerity measures, and with fears of the crisis spreading to Italy and Spain, the EU is facing unpredictable political and economic consequences.