Explaining (again) the Euro/Greece Crisis to Grade 5
By Shlomo Maital
Hello Grade 5’ers! Thanks for inviting me. I know my subject, money and economics, is BOOOOOring. But believe me, it is important for you to know what is going on, because when you are just a few years older, what happens in Europe will affect you. Because Europe is the world’s biggest, or next-to-biggest, economy, depending on how you add the numbers.
So here’s the deal. Europe has had lots and lots of terrible wars, with France, Germany England and others fighting each other. Someone (in France) had a great idea. What if we stopped fighting and made money together, by buying each other’s stuff? If you buy my stuff, I’m not likely to want to fight you. So they called it the European Single Market. And it worked beautifully. No-one thinks Europe will have a big fight any time soon (though, Russia may be an exception – that’s another scary story).
If you sell and buy, you use money. But there are 28 countries that belong to this European club. What a mess if you have to start finding escudos, guilders, lira, pounds, francs, and all kinds of weird money. So 19 of the countries decided they would use the same new currency, which they called the “euro”. Kind of like America, where the 50 states all use the same money, the dollar. Some 332 million Europeans use the euro.
But there is a problem. If you have the same money, you have to have the same rules for making the money. That means, you have to get all those 19 countries to agree on the “rules of the game”. You can’t play baseball or football if neither team agrees what the rules are, right? And here is where things broke down.
Some countries want there to be lots and lots and lots of euros. Some countries want just a little bit of money. Some countries (like, a little country called Greece, only 11 million people) broke the rules, spent too much money, and got into trouble, just like we do when we spend too much. Because they had to borrow and now they have trouble paying back what they owe. Other countries, like Germany, who had lots of money, helped Greece but sent Greece kind of to the penalty box. No more spending. Less treats, less goodies. And Greece didn’t like it. I wouldn’t either.
So Greece has had elections and its new leaders are making a big fuss about the punishments other countries have given it. Some think Greece might even leave the ‘club’ (the euro). That might be terrible, because then some other countries might do the same, and the whole club would collapse. So, the 27 countries want Greece to stay in the club but they do not agree how to make that happen. It’s like, do you punish the Greek people for overspending (they didn’t do it, their leaders did)? Do you forgive them, and then others might do the same? Why should other countries give money to Greece? But if they don’t, they will lose too, because the whole Euro club might come apart.
And you know, Grade 5’ers, I guess you could see this coming. If you start a game, and you have not all agreed clearly on the rules, including for things that are really strange (like, what if two guys are on second base – who’s out? What if one player’s mother comes on the ice and drags him (the goalie) off to Hebrew School? (yup, happened to me) – you’re going to get into trouble. Those Europeans, they started a club without a clear set of rules, and worse, without any way of leaving it without causing REAL trouble.
I’m pretty sure they will muddle through and keep that weird euro club going. They all have too much to lose. But boy, kids, I think you Grade 5’ers could have done a far better job. Those Europeans, they couldn’t see their fingers even if they were right in front of their nose. So, when you go to play a game, or start a club, make sure everyone knows the rules. Kids usually do. It’s the grownups who are dumb about that sometime.