Rumour has been floating round the market now for several weeks that Greece is going to default on its debt and needs a FURTHER bailout in addition to the one already made. There are huge protests in Spain, with youth unemployment at 45% (By contrast here in the UK it’s 20% and that’s considered a national crisis) . Portugal has just secured a bailout, and of course Ireland as well, rumours are Belgium is next. The UK’s economic austerity policies have made had to borrow $40 billion more this month than they were expecting, as our economy is pretty much stagnant
If Greece defaults on its debt, and readopts the drachma, as is very possible, it risks completely breaking up the Eurozone - investors would pile out of Greece because why would they want Greek bonds when they could have stronger German ones - and a double dip recession all over the Eurozone. The great european federalisation project is at risk.
A few points
- Thank our lucky stars Gordon Brown told Tony Blair not to adopt the Euro.
- Europe seems poised between the industrial countries who have emerged or are in the process of emerging from the financial criis (France, Germany, to a lesser extent the UK) and the other countries who are suffering recession. Investment in Europe is pre-recession levels.
- Political will. The success of the True Finns, opposed to EU bailout, will make politicians consider there own careers against the great european project. It’s a sticky situation to say the least.
What does everyone across the pond think? Are we in Europe doomed or is this market hysteria?