Events are rapidly coming to a head in Greece, and the consequences could ripple through all of Europe.
Leading Greek economists and bankers yesterday warned George Papandreou, prime minister, that he had to announce bold initiatives to rescue the country's collapsing bond market and avert the possibility of defaulting on a rising public debt.
Yannis Stournaras, an Athens University economics professor and former chief adviser at the finance ministry, said: "Other countries in trouble have already taken measures. If we don't quickly follow suit the adjustment will be imposed by markets and it will be violent."
How violent? Maybe not as violent as the protests in the streets of Athens. Already there are student, pensioner, and public worker protests and strikes. Remember that the current government is only two-months old, after the old government nearly collapsed under the pressure from street riots.
This puts the current government in an extremely difficult situation. The public debt is set to rise next year to 124 per cent of GDP, with a fiscal deficit of over 12%. Meanwhile, the public pension fund is expected to go into the red as early as 2011. The fiscal squeeze requires draconian cuts, but the public workers of Greece are not a wealthy group. They will have no choice but to turn out into the streets en mass.
Premier George Papandreou recognizes that.
"Salaried workers will not pay for this situation: we will not proceed with wage freezes or cuts. We did not come to power to tear down the social state," he said.
On the other side are the foreign creditors, and they don't care about Greece's internal problems.
“It’s five minutes to midnight for Greece,” Buiter, who will join Citigroup Inc. as its chief economist next month, said in a Bloomberg Television interview today. “We could see our first EU 15 sovereign default since Germany had it in 1948.”
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They have cut programs or face a meltdown. Plain and simple!
ReplyDeleteThe Greece will be supported by the EU. Merkel already stated this. This means the whole EU will have to pay for defaulting countries as Greece, Lithuania, Latvia and probably Spain and Ireland.
ReplyDeleteLess likely to default are Portugal, Italy and the UK.
In the end the people that have taken care not to live beyond their means will end up paying for everyone else.
You are very naive indeed if you think Greece'e problems could take down the eurozone. Why don't you go and educate yourself about the eurozone, its economies and how the ECB works? I get this dismissive attitude towards Europe and the eurozone only from Americans, who are just too lazy to educate themselves about Europe. They seem to think that Europe is still what it was 30 years ago. Many things have changed since that time and the EU GDP, population, productivity growth etc. are larger than what they are in the States. But what the hell, go and be ignorant for another day - this way you won't notice the EU completely taking over the numero uno position on the world stage. You guys are just so deluded its no wonder people think that Americans are stupid (an opinion, which I don't share, but this doesn't change the public perception). Indeed, the financial troubles all originated from America and banks, the SEC, the OCC, the OTS, the DTCC and the FEd but you guys were asleep at the switch. And even though you hate the bankers, you are OK with bankers donating money to Congress, the Senate and even Obama. If you really cared, you'd do something about it. You are truly one bunch of deluded people. Just like the Germans were before the rise of a certain dictator back in the 30s.
ReplyDeleteGo ahead, dismiss everything I said and pretend that 35 million people aren't living on food stamps, the poverty is not rising and that income inequality is not the largest in your country of stars and stripes.
1:51 instead of demeaning the posters and citizens here as well as the articles, the viewers that frequent this blog are a VERY receptive audience to education. Please enlighten us further.
ReplyDelete1:51, don't paint us all with the same brush in one big stroke. Not all Americans are lazy and asleep at the switch as you describe it. Folks are slowly waking up, the mid term elections will be a blood bath and might even foster a new party, but this takes time. Some of us DO care, just not enough of us yet to make a noticeable difference, so maybe you can educate us instead of admonish us when most of us here might even agree with you should you feel compelled to elaborate.
ReplyDeleteLuckily for you Europeans, we Americans are far less receptive to dictatorship. You will find this out in the next few years, from the safety of your little cottages as America burns.
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