Greece and the Euro Crisis

By | November 3, 2011

European Union and the Euro (€)

Just in case you don’t know, the European Union (EU) uses, predominately, the Euro (€). Some countries, such as Great Britain, chose to not use the Euro. And some European countries, such as Switzerland, didn’t even join the EU. Now we see that Greece, a member of the Eurozone (countries in the EU that use the €), is just about bankrupt and continues to look to the International Monetary Fund (IMF) for a €8 billion loan in November, 2011, and says it will run out of money in mid-December if it does not get the loan.

Greek Referendum or Not?

Greek Prime Minister George Papandreou expressed optimism Wednesday, November 2, 2012, that the Greek people will support his plan to remain in the Eurozone despite having to endure austerity measures. Now we learn that a national Greek referendum on the latest European bailout for the debt-riddled country may never happen. Papandreou said that he would never place membership in the common currency up for referendum. The EU bailout would give the heavily indebted Greek government €130 billion while it imposes a 50% write-off on private holders of Greek debts, in return for deeply unpopular austerity measures. Papandreou said the referendum on the deal was never an end in itself, and there were two other choices – an election, which he said would bankrupt the country, or a consensus in parliament. “If we had a consensus we wouldn’t have to go to a referendum,” Papandreou said.

The G20 Summit

The G20 Summit is being held this week in Cannes, France. The leaders of the 19 largest economies in the world are here (the 20th permanent member of the G20 is the EU). Europe’s leaders said they had reached the end of their patience with Greece, demanding that the beleaguered nation declare whether it wants to stay in the Euro currency union — or risk going it alone.

Here is a very brief summary of decisions by G20 countries:

  • The Chinese have minimized the prospect of investing more money in a eurozone bailout.
  • Jean-Claude Juncker, the Luxembourg prime minister who chairs meetings of eurozone finance ministers, has said that the EU is preparing for the possibility of Greece leaving the Euro.
  • David Cameron, British Prime Minister, confirmed that Great Britain would consider increasing its contribution to the International Monetary Fund to help it countries in trouble, but Great Britain would not contribute directly to a € bailout.
  • George Papandreou, the Greek prime minister, has thrown the opening of the G20 summit into confusion by offering to resign.
  • David Cameron has confirmed that Britain is willing to increase its contribution to the IMF in the interests of promoting global economic stability.
  • G20 leaders have signalled that they are going to put more money into the International Monetary Fund.
  • French President Nicolas Sarkozy has called for the international adoption of a financial transaction tax (or Robin Hood tax).

Germany’s Take

Germany is by far the most stable economy in the EU. So what do the German people think about once again bailing out Greece? Germany’s best-selling daily newspaper, Bild, summarized the view in Germany that Greece had pushed things too far by calling for a referendum on its bailout deal. “Take the Euro away from the Greeks!” read Bild’s front-page banner headline. “That’s it,” Bild wrote. “We put up hundreds of billions of Euros to save the bankrupt Greeks and now they’re going to have a referendum to decide if they’re going to agree to austerity measures.”

Hermann-Otto Solms, a financial policy leader in German Chancellor Angela Merkel’s center-right coalition, said Greece should start thinking about leaving the eurozone. The worsening Euro crisis has hurt Merkel’s standing in Germany, with 50 percent now saying they do not want to see her win a third term in the next election due in 2013.

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