Monday, September 10, 2012

Thoughts on Greece

If you decided to travel to Europe right now, I am sure that all you would hear about is the situation in Greece. The situation is dire, but Greek government itself is largely to blame. When Greece entered the Eurozone, it spent lavishly so much that the salaries in public sector have raised by 50% from 1999 to 2007. This spending coupled with the fact with massive tax evasion made the government's treasure run dry before even the crisis hit in 2008. This is the reason why Greece has been affected the worst by the crisis out of all the Europe.( Eurozone crisis explained ) .

To remedy the situation, Greece was given 240bn euros of loans and the debt write-off, but most fear it won't be enough. Now the troika (the European commission, European Central Bank, and International Monetary Fund) demands certain austerity measures to be implemented in order to secure bail out and remain in Eurozone. The latest of the austerity measures is 6 day work week. The earlier bailout demands have worsened the Greek economy, thus Greece is will not be eager to implement the coming austerity measures.

One of the two options going forward is likely. Either the week countries like Greece, Italy and Spain leave EU or are kicked out, which can potentially unravel all of the EU. Otherwise, there is a possibility of closer European fiscal union developing, which means fiscal policy will be coordinated at the continent level as well as monetary policy, bringing the E.U. closer to being a sovereign state.

The second option is much more appealing, however tricky. The nations are not quite ready to give up their independence to that level, but it would make EU more competitive with the growing markets of China, India, Brazil and etc. Perhaps the time has come for the EU to either work closer as a team.  One thing is certain, if EU does develop closer fiscal union it will likely be a force not to be reckoned .

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