While the worst crisis in the history of capitalism has started itself in the United States, the second wave of the crisis is believed to be hitting from the Eurozone. The latter, torn by political and economic debates regarding its future, is likely to slide into recession if the state of affairs remains the same. Political leaders of the Euro area implement measures that are likely to heal the symptoms of the problem and not the problem itself. While they patch holes in budget deficits, the whole world is expecting the worst from Europe.
There are several indications that the second wave of the crisis is likely to arrive from debt-hit Europe. First of all, levels of the government debt that was accumulated during the period of easy lending and booming exports within the Eurozone suggest that the nations of the economic union will need time to recover from the current crisis. Which is more, there is little known about possible sources of financing those debts. While for some countries like Great Britain the situation does not appear to be so gloomy, for countries like Italy and Portugal austerity measures and collective aid do not produce the desired effect. If the political leaders of the Eurozone keep the status quo, the situation will be worsened by another outburst of illiquid government bonds.
Secondly, unemployment especially among the youth remains high. Moreover, unemployment rates for some countries like Spain are increasing. Social tension is combined with the demographic crisis, which for social economies of Europe with their high levels of payments on unemployment and other social benefits is extremely acute. Population aging along with immigration policies that keep tightening in the European Union leave no possibility for young people to adjust to economic changes.
However, European leaders still have time to save the situation. If they brace themselves against unpopular measures such as deeper integration of the EU, common fiscal and monetary policy, stricter financial regulation and more power for the European Central Bank, they would still be able to save the single currency and prevent markets from panicking. The future of the Eurozone lies within the premise of introducing changes to the Maastricht Treaty – the founding treaty of the monetary union. The changes would have to provide the European Central Bank more freedom in setting fiscal policy. Only with deeper integration of the Eurozone it is possible to avert the second wave of the crisis.
One problem would still remain unsolved and it is free labor mobility in the EU. Although the Union declares that workers are to move freely across national borders, technically it appears to be difficult due to a variety of languages that one has to learn in order to be employed in Europe. However, proper design of social policy and educational programs may help solving this problem.