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Just yesterday, this article was posted on The Economist which talks further about the crisis in Greece. New interesting points:
1. "As the largest EU economy, Germany will contribute more than any other country towards a Greek rescue (though German banks also hold large amounts of Greek government debt, and thus would suffer greatly in the event of a default)."
2. There really isn't much of a plan for solving Greece's financial crisis. "EU leaders first pledged in February they would not allow any member of the euro zone to fall victim to a sovereign credit crunch, but failed to explain how they would carry out this promise—as if hoping that their resolve alone would frighten the markets into submission."
3. Greece's loan needs would be extremely high. "Reuters news agency quoted a Greek official as saying the country is likely to need a total €80 billion of loans over three years. If so it will be the largest multilateral rescue of a debt-ridden country yet seen."
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It seems nearly that Greece could gather €80 billion without being sunk under the interest that would gather on it. Germany is not likely to pump a majority of that in without a high interest rate. I think that would just be throwing money at a lost cause, as sad as that is. Is defaulting really that much of a disaster? There has to be a better long term solution than overly heavy borrowing.
ReplyDeleteI don't understand why these countries would have a motivation to loan this kind of money to a country that doesn't seem to have a solid plan on what to do in order to get out of this hole. I'm sure the funds can be put to good use in such a down economy, but who's to say that the people in charge will do anything that truly helps to alleviate the problem and prevent it from getting worse now that they will have more debt to be responsible for.
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