Monday, May 16, 2011

The Greece crisis that would not go away

A few months ago, I wrote about the European debt crisis and how Greece was faring at that time. When the first loan guarantees were given to Greece, it was an event with much fan fare, but then of course, the Irish and the Portuguese crisis evolved. Well all is quite on the Irish and Portuguese front (for now at least) and we are back to square one with the Greek tragedy. With more than a hundred billion Euros in aid, the debt crisis was supposed to go with the austerity measures in place. But it was not meant to be as the budget deficit is much larger than expected and hence the Greeks need more than 60 billion in euro to fend off their default time.

But as been pointed out repeatedly that the Greeks would not be able to get out of this debt mess without get even more aid with their generous social benefits in place still. Unless reality and sanity prevails, the Greeks would be better off exit the door out of Euro since with all this aid, they would not be able to keep their house in order and pay off all the loans with a credible export sector and more sacrifices from their people who are not use to it. The rich countries which are trying to shore up the Greek economy with guarantees of loans are demanding more cuts in expenditure and more taxes. How long will the Greek people take these unusual steps to fix their economy is anybody’s guess. But it is going to a long road ahead and maybe it is time to exit the Euro and come back to the old drachma currency.

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