News ID: 16423
Publish Date: 25 July 2015 - 12:12
The failure to solve the Greek problem ends in Eurozone collapse.

LHVnews, EU and Greece have two ways forward:

EU is able to solve Greece crisis.

EU cannot solve the problem and euro zone may collapse.

If EU can solve the Greek crisis, it will expand the trust among the EU countries which overall boosts Euro zone's system of problem solving. In effect, it also brings the possibilities of solving other problems such as immigration and Britain referendum to exit.

The failure to solve the Greek problem in action imposes harsh economic policies which destroy the Greek economy. Greek banks will partially collapse, while many savers will lose their money. The policy of austerity has not worked in the past five and a half years, and is unlikely to work now, DWN newspaper wrote.

The consequences for Eurozone countries will be dramatic. The Greek banking panic could in seconds become a European banking panic which would be uncontrollable. The solidarity int he EU is eroding, with countries acting in their own selfish interests. The refugee crisis is likely to become the next failure in the EU, which will have members acting in their own interests and not in the interests of the Union as whole, the article said.

After signing the agreement with Greece, EU's nightmare has begun. Life in Europe is no longer determined by contracts, but by the law of the jungle, the newspaper wrote.

If the EU Cannot solve the problem and Greece leave the euro zone, the long-term economic effect is that the IMF will be out billions of dollars which they need to pay back to their poorer members. The Euro will be seen as less safe a currency than it once was and that will permanently raise interest rates in many European countries. It will permanently reduce the appetite for Euro will mean that the so-called periphery countries in Europe — notably Portugal — will be looked at with suspicion that will make it harder for them to get investment and funding.

The socioeconomic impacts of this crisis are that The Greek people feel the Northern Europeans are trying to get blood from a stone and the Germans feel they’re being exploited as well.

Britain's attempt to exit the EU is another consequence of the crisis. David Cameron, the prime minister, has promised an in/out referendum vote on Britain’s EU membership by the end of 2017. Greece exit pave a way to this and that entire end in euro zone collapse.

A Greek financial crisis is caused by a country’s excessive indebtedness, which generally reflects a combination of mismanagement by the debtor country, over-optimism, corruption, and the poor judgment and weak incentives of creditor banks. Greece fits that bill.

Greece was heavily indebted when it joined the eurozone in 2001, with government debt at around 99% of GDP. As a new member, however, Greece was able to borrow easily from 2000 to 2008, and the debt-to-GDP ratio rose to 109%.

When a country’s prosperity depends on the continued inflow of capital, a sudden stop or reversal of financial flows trigger a sharp contraction. In Greece, the easy lending stopped with the 2008 global financial crisis. The economy shrunk by 18% from 2008 to 2011, and unemployment soared from 8% to 18%.


Mehdi Alamdarlo

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