Pity Poor Europe: Greek Debt, Falling Euro, Smoking Volcano Add Up

May 26, 2010 — -- Pity the Europeans. Whatever your politics, whatever thoughts spring to mind when you think of that continent (social welfare? Renaissance Art? Rude Frenchmen?), take a moment to consider the mess they're in at the moment.

Their common currency, the Euro, is in near-free fall. Economies considered far more robust and better-behaved than, say, Greece, are being punished. Fiscally responsible Spain is the latest nation to have its banks battered by the debt crisis -- and before you say, "Who cares about Spanish banks?" consider that Spain's is the world's ninth-largest economy; its troubles will ripple far further, and more dramatically, than the shock waves from Athens.

In the meantime, the post-World War II European social compact -- a cushy (to Americans) cradle-to-grave set of benefits -- is in mortal danger. In Greece it's already being dismantled; hence the nastiness in the streets of Athens.

In Italy an aide to Prime Minister Silvio Berlsuconi warns of the "dire sacrifices we are forced to take...to spare Italy from the Greek risk." A top international financier visited our New York offices the other day and told us, among other things, that he feared "serious social unrest" as Europeans grapple with these changes.

But -- this being a season of discontent -- the misery doesn't end there. Travelers and businesses across Europe are having to consider the vagaries of Eyjafjallajokul, that impossibly-named volcano that continues its long belch in the North Atlantic. Flights are diverted, lengthened, or simply kept home. Air traffic controllers struggle to make an almost-daily decision; the international air travel body IATA issued an acid statement, concluding, "The system is broken." And a new report puts the price tag of all this disruption at a truly volcanic $5 billion.

For good measure, Mother Nature has chosen this moment to visit another trauma upon the continent, one crowded out recently by other news: the swollen Vistula River has killed sixteen people and forced tens of thousands more from their homes in Poland. At this hour the capital, Warsaw, is threatened. Damages across Poland are estimated at more than $500 million.