Tuesday, May 15, 2012

Greece And the Euro Zone

As Greek President Karolos Papoulias summoned leaders from the various political parties in Greece to try to form a government, financial markets have already reacted by sliding down. The markets do not believe the leaders of Greece could put together a government and believe that Greece will have to leave the Euro zone.

Not a moment too soon in my view!

As I have said before, it would be better for both Greece and Europe if the Greeks leave the Euro zone. The biggest problem Greece faced currently is the simple fact that they do not have an economy that can use the Euro as their currency. Despite current weakness of the Euro, the Euro is still one of the top currencies in the world.

Greece do NOT have one of the top economy in the world.

To be fair, it’s not as if Greece ever had an economy worthy of the Euro. For years various Greek governments played musical chairs, taking turns padding the book to make it look like Greece has an economy worthy of joining the Euro zone. However in truth, they never did and when the financial crisis happened, the house of cards came falling down.

That is the basic problem facing Greece right now. If they had their own currency, the currency would have fell in line with their economy. This would make it easier for them to sell goods overseas and tourism in the country would be up because it would be cheaper for people to visit the country. With the Euro as their currency, none of these will happen. Greece needs a cheaper currency

For all the bailouts, German Chancellor Angela Merkel’s draconian economic austerity program, economic technocrats; that is the fundamental problem Europe need to solve if they want to keep Greece (and some of the other countries) in the Euro zone. How to make the Euro (a strong currency) work for the weaker economies in the Euro zone? If they don’t find a solution for that, Greece may just be the first of many countries that has to leave the Euro zone.

1 comment:

Ira Morse said...

This Euro Zone madness is aired in radio stations days ago, until now. If Greece departs from the Euro Zone, this will not be a problem of the Euro Zone, because Greece will suffer from the consequences, not the Euro Zone.

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