As the EU ponders measures to avert Greece’s impending default, one of the newly-discussed options is to halve the Southern country’s debts, which some argue is not the best solution.
EU leaders must make a 'quantum leap' to avert disaster in the face of a Greek default and a possible collapse of the Euro – that is the opinion of Johan Van Overtveldt, editor-in-chief of Belgium's leading Trends business magazine and author of the book “The End of the Euro.”
His comments come as Greek Prime Minister Papandreu spearheads a PR mission to help Angela Merkel persuade German industry that Greece is worth investing in.
But Overtveldt also says it is simply too late for the Eurozone and that contagion among its members is now inevitable: “The situation in Portugal and Ireland is well-known; Portugal is I think in worse shape than Ireland, but the big question is what will happen with Spain and Italy because here they announce the debt is much higher and the need to intervene is that much higher.”
The only solution that the EU has in van Overtveldt’s eyes is what he calls a “big quantum leap” after a term coined by European Central Bank head Mario Draghi:
“When you go immediately towards a highly integrated political union, where you have a decision making that goes for all the countries involved in the Eurosone area, but of course the way politics are going in the counties at the moment such a perspective is a fata morgana.”
George Katroungalos, a lawyer and constitutional law professor in Athens, stated that Greece’s debt has nearly doubled during the country’s two years of austerity measures.
“When the austerity measures started, our debt was 119 percent of our GDP, and now it is over 150 percent, and according to the latest IMF report say it is going to be over 189 – the figures speak for themselves,” he told RT.
Financial advisor Marco Pietropoli believes austerity in the near term will allow Greece to qualify for another round of bailouts, but economically speaking, severe cuts in a recession is only going to drive the country further into recession.
The Greek finance minister seems convinced his country will get its next bailout payment. But according to Pietropoli, the money will not be pumped into the Greek economy.
“This is money going to Greece’s creditors,” he explained. “The bailout fund is simply servicing the existing debt. It is not actually being invested in Greece in terms of creating jobs. What is happening here is money can’t be borrowed by the Greeks on the markets, because the markets have lost faith with the Greeks being able to service their debts moving forward.”
Economic analyst and international lawyer Nick Skrekas says that over 80 percent of the Greek population wants to stay in the Eurozone, but the conditions being imposed on the country are too much.
“Unfortunately, tax hikes and more spending cuts is what the troika of lenders [the European Commission, European Central Bank and International Monetary Fund] demands from us – and it is a very one-sided bargain,” he told RT. “I think they have been pushing Greece and Greeks far too far. And I think it may result in a bit of a debt trap because the more you tax, the more you destroy the economy, and the worse it is to repay your debts.”
“I am not altogether convinced that the Euro will be around forever in its current form,” he added. “It needs deep institutional changes. This has been avoided for far too long. We have a very divided Eurozone leadership at the moment. There’s a lot of diverging opinions, there’s a lot of conflict. I think they would be very unwise to even suggest that we leave, because quite frankly, they can’t force us to leave.”
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