Problems in the North and South Threaten the Eurozone

  on April 10 2013 8:39 AM
A woman stands in front of a banner displaying the stars of the European Union flag before a ceremony to mark the start of the European Union?s Lisbon reform treaty in Lisbon December 1, 2009.
A woman stands in front of a banner displaying the stars of the European Union flag REUTERS/ Nacho Doce

The euro climbed to $1.31 on Wednesday morning despite a growing anti-austerity push that has been gaining momentum over the past month.

Protests have been commonplace as climbing unemployment and harsh budget cuts have taken their toll on struggling nations; but now it seems resistance is ratcheting up as one by one, southern European countries are taking a stand against the eurozone's austerity-centered recovery plan.

In Italy, unexpected voting patterns resulted in a gridlocked election, which has left the country without a government. Cyprus' rejection of the original European Central Bank's terms for its bailout caused many to wonder if this type resistance would be contagious.

Now, both Portugal and Slovenia are following suit by opposing ECB policies. Portugal turned down the latest round of ECB mandated cuts in order to receive its next bailout payment and Slovenia has committed to resolving its financial problems without ECB intervention.

The problems aren't contained to just the south either. A recent ECB study has angered many Northern Europeans whose tax dollars have been funding the bailouts for financially strapped eurozone members.

According to the Wall Street Journal the study depicted individual wealth in all of the 17 eurozone countries, shockingly it found that in general the struggling, southern countries had much higher net wealth than their northern counterparts.

For example, Cyprus had a median net wealth of 270,000 euros, five times higher than German households, which were near 50,000 euros.

Although the study has a few faults, namely that its assessment of home ownership, the discrepancy between northern and southern European nations could play a large part in upcoming elections in Germany, where citizens are becoming increasingly fed up with the nation's role in sovereign bailouts.

Already angry that their tax dollars are spent on rescuing failed banks and paying government debt, the data is likely to add fuel to the argument that at least part of a country's bailout should come from depositors in that country, as was the case in Cyprus.

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