Friday, December 1, 2017

Will Greece Destroy the Euro?

The economic crisis in Greece and the rest of Europe is something that's been getting a lot of news coverage lately. It's not every day that a trillion dollar support package is created to help a single, not too big, country overcome its financial problems.

Greece, one of the smallest of the 16 members of the Eurozone, created a terrible feeling of uncertainty in the markets as it became clearer and clearer that the chances of it defaulting on its debts was high. This led to a major panic in the Foreign exchange markets, causing the Euro to slide down to less than $1.2000, something that seemed impossible just a year ago.

Because its part of the Eurozone, the crisis in Greece led to financial issues for all other members including stronger economies such as Germany, France, And the Netherlands who seemed to be faring the global financial crisis in flying colors.

It has even raised concerns over the demise of the Euro as a currency, something which is reported to have been threatened by French President Sarkozi.

So, Will Greece Destroy the Euro? Will there be a return to national currencies?

I have a few thoughts on that issue:

1. The Euro is not dead yet. France and Germany have made a considerable effort to keep it alive by coming up with the huge financial aid package for Greece. As long as Greece reciprocates by taking firm measures to cut its spending and deficit and repay its debts, it may rise out of the hole it's in today and once again flourish. So, the Euro has a fighting chance.

2. The political atmosphere in the stronger nations of the Eurozone does not favor this aid package. In Germany, the biggest economy of the zone, public opinion is totally against this move, making it hard to foresee how another aid package may ever be created should the need for one arise. It may be politically impossible.

3. The political improbability of another aid package is the most worrying thing. Greece is not out of the woods yet and it is not the only country in financial dire straits in the Eurozone. Countries such as Ireland and Spain and Portugal has dismal economic conditions and may themselves require aid. If that aid will not be forthcoming, it may be necessary to eject some members out of the Eurozone to maintain the value of the currency. Whether this will happen or not is still anyone's guess.

So, for the time being the Euro is still around. In the future... all bets are off.