The EU is not at all pleased with Greek PM George Papandreou's decision to hold a popular referendum on whether to accept the austerity terms the EU wants in exchange for a second bail out.
They gave Greece what amounts to an ultimatum...either accept the terms now or leave the eurozone.
"Does Greece want to remain part of the euro zone or not," German Chancellor Angela Merkel said. "That is the question the Greek people must now answer."
French President Nicolas Sarkozy said the Greeks would get no more euro-zone rescue aid—"no French taxpayer money, no German taxpayer money"—until they answer. Greece would go bankrupt without the aid in a matter of weeks.
The Eurocrats are angry because they were under the impression they had a deal. Instead, Papandreou went back home, saw how deeply unpopular the new terms were with his own party and the Greek people and decided he needed the cover of a popular referendum, which he says can't be put together until December 5th at the earliest, which would take Greece over the brink. So the EU is essentially demanding that there be no referendum,which isn't going to happen.
If the EU insists on this course of action, Greece will simply default on its debt and start from scratch, leaving the other eurozone members holding the bag
The problem for the eurozone is that if the other troubled members like Ireland, Portugal, Italy, and Spain see Greece defaulting and going back into the drachma, they're going to do exactly the same thing and flee back to their own currencies after defaulting on their debt.
And the entire rotten edifice could come tumbling down, with major repercussions for world financial markets.
2 comments:
euro-zone rescue aid—"no French taxpayer money, no German taxpayer money"—until they answer.
maybe the greeks aren't the ones who should be holding the referendum.
As you described this in an earlier post, the settlement being offered to Greece was like being told to pay $2,400 per month when your income is $2,000 per month. If this is the case, then there is no way Greece could accept the deal as presented. Unless the other EU nations are willing to change the terms, it would seem Greece has no choice but to default.
Whether they default or the EU comes up with a better settlement offer the days of the kind of social services the Greeks had become accustomed to are likely over. They could only be sustained by borrowing money and it seems unlikely any one is going to lend them any more money.
Unless the US makes major changes, it is headed to the same situation Greece faces. Unfortunately the situation has become so dire that even if major changes are made in American policy right now it still may be to late for America to avoid bankruptcy. At a minimum, the days of the types of well fare services Americans have become used to will be over soon, as well.
Ms. Merkel leader of Germany recently stated that a failure to "unify" Europe through the EU could lead to war. Essentially this appears to be a threat that if the leading powers in Europe cannot achieve their goal of unification through economic means via the EU they will resort to war to accomplish their goal. If this happens, as a member of NATO, the US could get pulled into such a conflict. This along with the fact that we can no longer afford the deployment makes it vitally important that we withdraw from NATO forthwith and redeploy all forces currently deployed in Europe to defensible positions along our borders.
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