Europe has been facing crises over the years because of the Euro currency and its structural differences. European authorities have also been trying to solve these defects with no luck. Besides the Euro, Europe is currently facing crises such as the British referendum on European Union membership, Greece migration, and Ukraine’s pleas regarding Russian aggression According to George Soros Ukraine. These crises give European authorities sleepless nights on what should be done to curb them.
The United States joined forces with Europe in combating the Ukraine crisis. The partnership was in the form of financial support. However, this partnership has not yielded any fruits since it was launched. Europe tried to adopt the same mechanisms they used in addressing the Greece crisis to address the Ukraine crisis. The European authorities also followed the Minsk agreement that stresses the financial rights of Ukraine.
The Euro Crisis
Europe also failed in addressing the Euro crisis that affects the availability of funds needed for budgetary allocations. The European Union operates on a budget of £145 billion. However, this budget is a one percent proportion of the GDP of the EU members. Member countries are slowly reducing their contributions to the union. This factor is the main reason why Europe is faced with the Euro crisis.
Europe’s Emergency Loans Solution
Germany headed the European strategy to address the Greece crisis. The European authorities adopted an ‘emergency loans‘ solution to help Greece grow financially says George Soros. They failed because of the punitive interest rates that they implemented on the loans. They also adopted and managed a new reform program. They would have succeeded if they allowed Greece to manage the reform agenda. Germany was reckless in running the reform program. They did not take into consideration the needs of Greece as a country. Greece currently has a massive national debt, and European authorities are no longer assisting the country with emergency loans.
European authorities have disputed over the Ukraine crisis with the IMF. This dispute has slowed down the process of addressing this crisis. They have tried bailing in their bondholders instead of bailing them out. Ukraine is struggling to get out of the Russian aggression says George Soros. European authorities should evolve strategies for solving Ukraine’s pleas.
The Preferential Treatment Plan
Solving these crises at once is quite difficult. One way of mitigating their effects is by giving each crisis preferential treatment. According to George Soros, Europe should prioritize on solving the Ukraine crisis first. The EU can reap many benefits by ending the Russian aggression against Ukraine – stabilizing Ukraine will encourage more investors and trade between the nation and EU member countries. Additionally, the EU will restore the confidence of its member states that have been showing signs of pulling out from the organization.
The old Ukraine was quite difficult to reform because of its association with old Greece. Apparently, Ukraine has undergone numerous changes as a country. The new Ukraine can be reformed since it underwent a Maidan Revolution back in 2014 says George Soros. The main reason why Europe is failing in addressing the Ukraine crisis is that they treat the country like old Greece. They do not categorize Ukraine as a European Union member.
Ukraine has been struggling to deal with debts. To this end, the country has been seeking for financial support from different financial institutions including the International Monetary Fund. The IMF has demanded the country to enter into negotiations with its creditors in order to qualify for financial assistance. Ukraine’s foreign debt of $19 billion is becoming unsustainable owing to Russian’s aggression, which has taken a toll on the country’s economy. George Soros regrets that Ukraine does not have remedy to bankruptcy. The country lacks chapter 11 for the sovereign borrowers to have a cease-fire between borrowers and lenders. In addition, the country does not have powers to decide the type of debts to be reorganized and mediate between the two sides.
Soros argues that Ukraine’s leverage lies in threatening to default unless it is guaranteed debt relief. According to George, bondholders must be warning Ukraine regarding its default saying that no investor shall be interested in investing in the country for long. Sovereign debts have long-term effects, especially when lenders exonerate themselves from the battle. The effect of lenders dragging out is that it causes financial crisis such as the Greek crisis. George agrees to the fact that when lenders reach a speed deal, a country gets back to the market in a year’s time.
It is for this reason that Nicholas Brady, former U.S. treasury secretary, unveiled the Brady Plan. George Soros posits that the plan urged banks to extend debt relief for the Latin American countries that were pursuing rational reform agendas. When drafting the plan, Mr. Brady was well aware that investors would fix their eyes to the future when making considerations on lending to a nation that has defaulted on its debt obligations. George states that the Ukrainian government is working hard to augment the structural reforms envisaged in the Brady Plan of 1989. These reforms are focusing on doing away with corruption, making the country independent of the Russian gas, enhancing the agricultural sector and reforming the banking sector. The reforms also seek to restructure the judicial system and making Ukraine to be part of the European Union.
George argues that people’s identity is created through individual elements as well as elements from larger units to which one belongs. He goes ahead to posit that individual’s impact on reality is largely dependent on the elements that dominate their conduct. George recalls that when citizens staged a suicidal attack on the armed force in Kyiv, their aspirations for representing their nation outweighed their individual mortality concerns. Over the years, Ukrainians have shown their willingness to be affiliated with the European Union. However, the EU is divided by the euro crisis courtesy of debtor and creditor countries. George believes that the euro crisis has seen Russia outmaneuver the EU in its deliberations with Ukraine regarding an Association Agreement.