1) The Visegrad 4: Eastern Europe as a Major Player
2) The Re-Emergent Russian Bloc
3) Baltic Solidarity to an Emerging Russia
4) The EU Periphery: "Core" EU's Albatross
5) The Atlantics: A Return to Arms-Length Continental Management
Today we continue our 5-part series on the Blocanization of Europe by skipping ahead to the EU Periphery, as it's currently of great interest to state leaders and armchair political scientists, alike. Rather than talking borders and weaponry, we'll be talking about money. It's just as important.
Standard & Poor's have cut the credit ratings of both Portugal and Greece to CCC, tied with a few other countries as the worst credit ratings in the world (see here for S&P credit ratings definitions). These, along with mediocre credit ratings for Italy, Spain, Belgium, and Ireland, put the Eurozone concept (and European unity in general) at major risk (see Wikipedia for an elaborated explanation of how the Eurozone and European Union differ).
The periphery states have become an albatross to the "core" EU states (for the "albatross" reference, please see Rime of the Ancient Mariner). Portugal and Greece have both already received bailouts, and Greece is likely to accept another in exchange for a modest austerity plan. Despite these bailouts, S&P (as well as Moody's, and other credit rating agencies) have tanked most of the periphery states in credit rating--indicating their likelihood to be able to pay back credit on time.
This is relevant for a few reasons:
1) Chronically weak periphery states will mean that the Euro won't overtake the US Dollar as the world's dominant currency. It will mean less influence for France and Germany on the world stage than they would otherwise have.
2) France and Germany may become tired of bailouts and allow defaults. The German & French taxpayers are subsidizing Portuguese & Greek deficits, and are likely to lose patience with it. If this occurs, Greece or Portugal may default, weakening both EU strength and solidarity.
3) France and Germany are looking for more financially stable partners. Generally, they are turning towards Russia, with little debt and significant earning potential (as well as few entitlement/welfare programs). Germany and France are likely to see much of the EU as a financial burden (rather than boon), and will focus on finding financial success elsewhere. This will drive Germany, France, and Russia closer together. Such a friendship has consequences beyond the EU Periphery--it will change the course of NATO, and US/UK strategy for a time to come (the latter of which will be discussed in our Atlantics section).
4) The continued struggle of EU periphery countries makes Eurozone obligations less attractive to potential members. Eastern Europe (technically obligated to join the Eurozone at some point) and the UK (with an option to join the Eurozone) are likely to balk at the idea of the financial burdens associated with Eurozone membership, and may try to find a way out.
Those who have read our previous posts are likely to see how this is a rather impressive compounding factor with other forces that are forcing Europe into blocs. The EU periphery is not going to become a bloc, perse--they are too weak to help each other--but the EU "Core" and V4 are likely to abandon the periphery at some point in hopes of better pastures elsewhere... and out of a fear of going down with the Eurozone ship, should it sink.