You may have noted that the cheers coming from Europe over the new Greek bailout deal are rather … uh … muted.
The reason is simple: the new deal is not the climax of the crisis. It simply means the climax has been pushed into the future. Greece and the euro common currency are no nearer to solvency today than they were last week or last year. The underlying conditions remain the same, and the new bailout deal epitomizes everything that is fundamentally inflexible and unsound about the euro. One (read as: “only) advantage of the new deal is that it buys Greece and the European Union a little time. But that’s all …
Germany even insisted upon a clause in the newest deal that might force Greece to leave the euro “temporarily” (for five years!), which doesn’t sound like a long-term plan as much as a short-term tactic to avoid scaring the markets. Economist Intelligence Unit’s Alex White summed it up nicely, describing this idea as: “Let’s divorce, divide up the finances, go our separate ways – get married again in 5 years?” Good luck with that.
So now what happens? By many measures, Greece is in as bad shape as the U.S. was during the Great Depression. As one Greek resident said, “In the third round of austerity measures, which is beginning now, it is certain that in Greece there will be no consumers, there will be only beggars.” Banks are shuttered throughout Greece, and ATM’s only dispense 60 euros a day to people who wait in long lines to at least retrieve that much (while it lasts, which won’t be for long). Limited to this small daily stipend, Greeks can no longer funnel money into the economy by spending freely, hurting businesses and threatening the ability of these businesses to make their own payments to the very broke banks. The stock market remains closed, and Greece continues to sell off state assets to recapitalize its banks.
Nowhere in the deal is mention of a real solution to reduce Greek debt. The bears worth repeating: nowhere in the deal is mention of a real solution to reduce Greek debt. This new deal is bad enough for Greece (and by extension for Europe). That is flies in the face of a democratic “No” vote taken a week ago makes it worse yet.
Meanwhile, Spain’s unemployment rate is still above 20%, with no indication it will decrease any time soon. Northern Europe, including Denmark, the Netherlands, and especially Finland are all struggling badly, as well. All of which is overshadowing China’s stock market, which is in absolute tumult.
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