Monday, March 5, 2012

Another Bailout On The Cards

Barely had the ink dried on the last bailout, word coming out of Europe is that Greece will need a third international rescue package worth 50 billion euros in 2015. This is only weeks after the second bailout which was approved last month.

I said last month when the second bailout was approved that I do not think bailing out Greece is going to work and this is the latest indication that I am right. Despite all the talk about how Greece’s problem stem from lazy workers, welfare state etc; the real reason why Greece is in a mess is the Euro. Simply put; Greece never had a strong enough economy to take the Euro as its currency. Their past government had to cook the books to get them into the Euro in the first place!

That is the real reason why Greece is in a mess right now and why no matter how hard they try, they can’t get out of economic troubles. In the past when a country’s economy collapsed, the country’s currency collapsed with it. Their products become cheaper, making it easier for them to export goods out and making their country cheaper for foreign companies to invest in. Tourism will also get a boost as it is cheaper for foreigners to visit.

That is not happening now in Greece because they have the Euro! Despite all the talk of recent weakness, the Euro is still one of the strongest currencies in the world. That’s a huge problem for Greece because the Greek do not have one of the strongest economies in the world.

That is why I say the bailout is not going to work and why Greece and the EU (European Union) need to bite the bullet and get Greece out of the Eurozone. No matter how the European restructure the debt, the Euro is the underlying problem. Until that problem is solved, there’s going to be a lot more bailouts for Greece.

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