GREECE’S troubled economy remains crippled with its citizens paying the price – one year on from the financial meltdown which pushed the eurozone to the brink.
Austerity measures slapped on the country by Brussels in return for a third bailout have meant stringent tax rises and harsh spending cuts.
Yet there is little sign that a recovery is in sight and many feel another disaster is looming.
Unemployment is close to 24 per cent. Continue reading
Germany and Greece face a dramatic eurozone showdown which could see Athens abandon the single currency to ease crippling austerity.
Euro finance ministers will hold crisis talks as a deadline for Greece to request an extension to its €240billion (£176bn) bailout programme looms. Continue reading
Suddenly, it has become easy to see how the euro — that grand, flawed experiment in monetary union without political union — could come apart at the seams. We’re not talking about a distant prospect, either. Things could fall apart with stunning speed, in a matter of months, not years. And the costs — both economic and, arguably even more important, political — could be huge.
Europe’s answer has been austerity: savage spending cuts in an attempt to reassure bond markets. Yet as any sensible economist could have told you (and we did, we did), these cuts deepened the depression in Europe’s troubled economies, which both further undermined investor confidence and led to growing political instability.
And now comes the moment of truth.
So now what? Right now, Greece is experiencing what’s being called a “bank jog” — a somewhat slow-motion bank run, as more and more depositors pull out their cash in anticipation of a possible Greek exit from the euro. Europe’s central bank is, in effect, financing this bank run by lending Greece the necessary euros; if and (probably) when the central bank decides it can lend no more, Greece will be forced to abandon the euro and issue its own currency again.
This demonstration that the euro is, in fact, reversible would lead, in turn, to runs on Spanish and Italian banks. Once again the European Central Bank would have to choose whether to provide open-ended financing; if it were to say no, the euro as a whole would blow up.
Full article: Apocalypse Fairly Soon (NY Times)