Home > Uncategorized > A new crisis looming. And its Greece again

A new crisis looming. And its Greece again

europe-debt-crisis-greece-ultimatumGreece goes to the polls at the end of January and the result could easily reverberate right around the eurozone. To put it simply, the far left Syriza party looks poised to win on its “anti austerity” platform

Generally I keep politics out of this blog but naturally enough certain political decisions will greatly affect the financial world. That doesn’t really need stating and this is the probably result of a Syriza victory given their commitment to refusing to abide by the terms of their bailout.

Gikas Hardouvelis, the Greek finance minister, warned on Sunday that the election of an anti-austerity party could lead to punitive European Central Bank economic sanctions against Greece.

The ECB holds the key,” he told Greece’s To Vima newspaper. “This key can easily and abruptly turn off bank funding and strangle the Greek economy in a split second.”

If the ECB or EU acts to remove support from Greece, the country could be pushed out of Europe’s single currency triggering the return of a crisis that threatens the future of the eurozone.

The background to Greece’s situation is well known. Simply put it was a laughable overspending economy that the sleepy and incompetent EU failed to address until it was too late. It remains a seriously negative stain on the whole structure of the single currency. Frankly they should have been ditched out of the euro a long time ago but the reality is that many banks would take enormous hits with the collapse of the currency. Whether this is so crucial to the banking industry now as opposed to then, I cannot say

It is perfectly natural that the Greek electorate will want to see any solution other than the present massive cutbacks. It is hard to look at the wider picture when you have lost a comfortable job even if you know full well that that position contributed and produced nothing at all. In many ways it could be argued that there has been a reasonable degree of fortitude so far but I sense it is not going to hold out.

Furthermore, aside from the economic mechanics, there is the political aspect. Frankly faith in the eu across europe is at a serious low and electorates across the countries obliged to fund the bailouts will not need to know the details to believe that enough is enough. Not just in terms of Greece but the whole edifice.

If Greece does not wish to become a pariah nation, then they must vote accordingly. If they do not do so, it is just possible that we could be looking at the start of a gradual breakup of the whole euro project.

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