As Spaniards were relieved by the news, the outcome shows
once again the weakness of the European Union. Spain is the fourth and largest
country to request for a bailout so far but it might not be the last. What’s
worse for everyone is that Spain
is the fourth largest economy in the EU after Germany,
France and Italy and now
it is in trouble. Frankly, the EU cannot keep on bailing out countries. They
must take steps to prevent the financial crisis gripping the EU from getting
worse.
That means kicking Greece out of the EU.
Yes, there is a case on how unpredictable things could get
if Greece
is kicked out of the EU but kicking the Greek out can help solve the crisis. Like
I said earlier, the EU cannot keep on bailing out countries. Not only will
there be a limit in credit and political willpower, there’s also the problem
that bailing countries out is just kicking the can down the road. If bailing
out countries could solve the crisis, the problem would never reach Spain.
If you look at the numbers, Spain's debt to GDP ratio is at
78%. This is even more favorable than Germany's, which stands at 82%. Right
now the problem is one of confidence, not finance. Kicking Greece out of the EU will be unpredictable but
there is a chance things would get better if Greece is kicked out. Keeping them
in will not. The problems of Greece
are real, and investor confidence in the EU is shot due to the problems there. It
will take years before things get solved and in the meantime, countries like Spain will be affected by Greece’s problems
Also, Greece’s
contribution to the EU is a mere 2%. It is frankly stupid to risk the whole of
the EU for a mere 2%. It might be painful, but getting Greece out of
the EU might help solve the crisis. Right now, that’s all you can ask for. Keep
them in, and other countries in the EU will just follow Spain in asking
for a handout. And that is something no one needs.
2 comments:
Sorry, Spain's Debt to GDP just went up above 90% after the 100b Euro bailout. And Greece will not be kicked out, they will get a 3rd bailout by the end of June 2012. The problem is not Greece, the problem is every country is over-indebted, the world has a deleveraging disinflationary problem. Not a Greek problem. And no, printing won't solve a damn thing.
Yeah and so did Germany's. A few things I need to say;
- all this happened because Greece's problem is spreading. Fear is the problem here
- Greece will need a third bailout, and at least another one after that.
- Italy and Spain would also need bailouts if things continue as they are
I don't get why people are speaking as if there is a choice here. There isn't. Greece has to go or the problem will just fester and grows (even more than it has so far). Bailouts are not going to work. If they could, the EU wouldn't be in this position of having to bailout Spain right? It's either say bye-bye to Greece or risk saying bye-bye to the Euro. It shouldn't even be a question! Considering Greece is only 2%, that is a stupid risk to take.
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