President of the EU Herman Van Rompuy announced yesterday that EU leaders had reached an agreement on helping Greece tackle its debt crisis. EU rules forbid the collective bail-out of a Euro member state but the scale and urgency of the Greek crisis has forced EU leaders to improvise. No deal-specifics have been given yet but it is obvious that rules and foreign involvement will be greater than ever in the Greek economic affairs.
German Chancellor, Angela Merkel and French President Nicola Sarkozy have clearly established their intentions to stand by Greece and assist in solving the problem as soon as possible in order to preserve the sustainability of the Eurozone and the EU as a whole. Greece has been suffering from ballooning fiscal deficits (12.7% of GDP) and mounting debt payments which account for almost 12% of its GDP every year. The government looks for raising 53 billion euros from the debt markets to repay previous debts.
In the midst of all the economic mayhem going on, EU leaders have given hope and courage to the Greek people who have been struggling for decades to enjoy lasting prosperity. The credibility of the Greek government and its economy were smashed after it surfaced that past administrations had been cooking the country’s books to contain deficit and debt levels.
The underlining reason behind this agreement is the realisation of the EU leaders that the Greek crisis has severely impacted European debt and equity markets destabilising the recovery trend of many other member states. Euro has plummeted to a 14-month-low against the dollar as uncertainty for the Greek case is still prevailing within the markets.
Let me just remind you that as distinguished economists, like Krugman and Roubini, have stated, a Greek default is not a realistic scenario. Having said that, the purpose of the aforementioned EU agreement is clearly to calm down the markets and highlight the unity and solidarity of the Union, something that was intensively questioned within the EU parliament per se.
Greece has been Europe’s playing doll and until Europe grows up, that doll will be an everyday experiment.
by the Self-Seeker
NewsAura 