
The initial European response was to dismiss the Greek debt crisis as a small aberration, given that it has a mere two per cent share of the ailing economy in the total eurozone output. But the contagion of this Greek tragedy spread quickly to fellow PIIGS (Portugal, Italy, Ireland, Greece, Spain). In Europe, these economies have always been known for their cavalier attitude towards financial stability. Since there is an incomplete understanding of the complex web of exposure by banks across Europe, the incidence of the contagion may be more than meets the eye. There is a serious gap between the quick-response stipulations of a monetary union and the slow political decision-making at the level of the European Union. The interim European Financial Stability Facility is yet to become a permanent European Stability Mechanism. Nobel Laureate Joseph Stiglitz also talked of a lack of will to support the weak economies. With the exit of Dominique Strauss-Kahn, The IMF’s ‘New Arrangements to Borrow’ to bail out Europe in distress is taking time to shape up. Germany and France, the strongest economies of the eurozone, are already feeling the heat. The head of the ECB has warned that the future of the European Union depends on the survival of the eurozone. There are suggestions that Germany would be better off quitting the Eurozone or perhaps regroup with other surplus countries, mostly Scandanavian. Many economists doubt whether the eurozone fulfils the conditions of an optimal currency area at all.
Whether it is the odious European loans described in the Greek documentary ‘Debtocracy’ or an Anglo-Saxon ‘conspiracy’ against the eurozone abetted by their media, speculators and rating agencies, one cannot say. But a Greek tragedy has been staged: the European dream of standing up to the dollar and its eventual replacement by the euro stands shattered.
Published in The Express Tribune, August 12th, 2011.
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