Angela Merkel said that Europe is facing its toughest test since the Second World War. Needless to say, the days of capitalist living and socialist economies may be finally over across Europe, including in Germany and France, and perhaps its time the European nations begin strapping up for a new age where the Asians control a part of their economy and living frugally becomes the best way to survive. Yes, it warms my heart to see that the days of gratuitous consumption in the European and even North American economies may be withering away.

After occupying the rest of the world for the past few hundred years, a part of me is pleased to hear all this protectionist talk coming from the US and other Western nations. Despite the massive debt Greece is in and despite the fact that Germany and France, as leaders of Europe, worked hard to get Greece's debtors to write down their debt to the country by almost half, the Greeks are angry. And why are the Greeks angry? Because its Germany, that's why. Those Nazi occupiers are back and the Greeks aren't liking it! Talk about beggars not being choosers.

As Greeks suffer from harsh austerity measures, there is growing popular sentiment here that the country has ceded key parts of its sovereignty, and its pride, to its foreign lenders.

Beyond populist talk, which ranges from euro-skepticism to anti-German demagoguery, experts say the concessions that Greece has made in exchange for the foreign aid it needs to stave off default — including allowing European Union officials to monitor Greek state affairs closely — are unprecedented for a member nation, making Greece a bellwether for the future of European integration.

“If we weren’t under the E.U., which is the only reason this loss of sovereignty may be justified, I’d have to say that Greece is an occupied country,” said Nikos Alivizatos, a constitutional lawyer in Athens.

Now since this is the New York Times, I do not know if they have put their own spin on the story because I could totally trust the media to obfuscate the truth to make it more salacious and scandalous. After all, the word "Nazi" sends a shiver down every American's spine! Actually, I may be wrong here and despite Angela Merkel emerging as the one European leader who seems to have brought some order to this debt crisis, some Greeks view her as the new Nazi occupier!

The Greeks may not be the only ones that seem to be angry at the current situation in Europe and Germany taking the lead in bringing some relief to the debt crisis. Her words that Europe must continue to integrate economically or there could be grave consequences for the continent took many people back to the first half of last century when the then German nation was responsible for bringing the first modern wars to the continent.  As the Sydney Morning Herald quotes the headline in the British newspaper Daily Mail - "German Chancellor warns of war if currency fails!"

But its very interesting to see that after what the IMF and other western lenders have been doing to the third world across the globe, they are applying the same medicine to one of their own. I've bought up this point before on my blog, but now that the European crisis has finally seemed to achieve critical mass, its certain that simple pussyfooting or simple short term measures will no longer work, and Europe has to take some tough decisions about its economic future. All this seemed very vague till some time ago, but now as expected, Merkel and Sarkozy have gotten the European bankers to back down and write down their Greek debt exposure.

For hours, negotiators had been trying to persuade the banks to accede to a "voluntary" 50 percent loss in the face value of their Greek bond holdings. The banks, which had already agreed to a 21 percent write-down, had dug in their heels.

They knew how badly the European leaders needed a deal and how much financial experts feared a disorderly, involuntary default. That could set off a "credit event," throwing world financial markets into turmoil, much as the collapse of Lehman Brothers did in the fall of 2008.

But Merkel called the bankers' bluff, said officials present at the discussions. Accept the 50 percent write-down, she told the bankers, or bear the consequences of default. In effect, she was willing to risk a credit event and place the blame for any fallout squarely on them.

So now Greece seems to have a plan going ahead, Ireland already had a plan with nationalisation of its banks and lots of bailout money, and nationalisation of banks across Europe, and now the show moves to Italy, which, being a G-7 nation, becomes too big to fail. According to that Economic Crimes link, Italy owes USD 2.7 trillion in debt, or 120% of its GDP!! How in the world are they going to get all that money even over several decades? In my opinion, Angela Merkel is hailed as a hero for getting the bankers to write down half of Greek debt, but how in the world is anybody going to write the Italian debt down?

There are many issues here that I constantly rant about when it comes to western economies, maybe with the two most important being how the western economies are moving towards protectionism after talking against it for so many decades, and the scale down from their gratuitous consumption and unsustainable lifestyle. Both of these will obviously change in the coming decades, and are changing right now as well.

Coming back to the point about Asia taking a lead in propping up the world economy in the near future, China and its money are on every body's minds as Europe tries to get China to put in their money in the rescue of Europe as well. As much as I dislike China, I also support them in the fact that they, along with other emerging economies such as ours, Brazil, Mexico etc, are correcting the long drawn skew in the global economy in favour of the western economies.

China is expected to demand significant concessions, including financial guarantees and limits on what Beijing sees as discriminatory trade policies, in exchange for any investment in Europe’s emergency stability fund. 

That Europe would turn so openly to China to help stabilize the debt crisis shows how quickly the Chinese economic juggernaut has risen on the world stage. Indeed, if China comes to Europe’s aid, it will signal a new international order, with China beginning to rival the role long played by the United States as the world’s pivotal financial power.

And I feel the reason I can support China in this is because I know that despite all its flaws, the Indian economy too is at a stage where it can't be arm-twisted any more by the likes of IMF/WB and even China. If I were a Vietnamese, for example, then I would be very, very wary of how China is slowly controlling the global finances.

At the same time, I am also very fearful that with the emerging world looking forward to consuming the way the west does now will be disastrous for the Earth. Of course, my long term view is that the Earth will revolt and in the next few decades, the environment will have been exploited beyond redemption, and then que sera sera. I hope India, China, Brazil and all their third world comrades realize that we must protect the environment for our sake and not start blowing smoke through our nostrils if a first world country tells us to. Its possible to live a comfortable, modern lifestyle with consumption of goods and use of resources, but it is absolutely necessary that we manage what we have better to make it go long and give the Earth a chance to replenish itself. But I digress.

I feel that the notion that globalization was a mutually beneficial economic model is not true anymore, with risks being shared with the most vulnerable nations and economies and the profits continuing to land in the hands of the mightiest of companies, most of which have their origins in the west. Sure Europe is in a crisis but I believe that while I am happy that a rightful shift in the global economy is occurring, whatever is happening today will now be mixed with heavy doses of nationalism, protectionism and distrust from all quarters. Those with the loudest guns will have the strongest clout, and as the economy becomes a greater cause of social distress in societies and we continue to grow (the world population will cross 7 billion soon), we will definitely see some fundamental shift in the way the world runs, and it could be something completely different from our usual conjured scenarios of East-West, BRIC, Asia, WASP etc. The world to me is getting more divided even as it integrates economically, and the only constant that will remain is that most of the global population will continue to struggle to survive.