The euro may already be lost. The Greeks are currently withdrawing their money from their banks at the rate of 700 million euros a day. That’s close to a billion dollars. Even the best capitalized banks cannot stand this kind of run for long.
Germany is standing firm that austerity is the only route open to the Greeks. I think they and the IMF are wrong. Greece is already anorexic, and cannot return to health on a stricter diet. The IMF has made this mistake before in Latin America and SE Asia. Admittedly, the picture is more mixed this time. The Greeks are out on the streets to protect, among other things, their right to retire at 55, and they have a reputation as first-class tax dodgers. Besides that, Greece deliberately doctored the books to make their national debt look smaller than they knew it was in order to get into the euro zone in the first place, and the Greek government continued to spend beyond its income in order to create government jobs to secure their votes.
One has some sympathy with the Germans who don’t retire until they are 65, and who went through a hard time after the reunification of east and west Germany after the fall of the Berlin Wall.
But Germany has benefited from the euro, possibly more than any other euro country.
In any case, the only way for the euro to survive is to federalize the euro zone so that money can move from economically successful areas to areas that are stressed, the way the American federal government is able to do in the United States.
There is no evidence that I can see that the euro zone governments are willing to bite the bullet and do this. They have certainly not done so since this crisis began two years ago.
If Greece exits the euro, willingly or otherwise, Spain, Portugal, Italy, and possibly Ireland, Belgium, the Netherlands, even France could tumble.
I just don’t see the euro surviving.
Though I hope it will, because this is a global economy now. The crash of the euro will have profound effect on the economies of America and China, and so on the whole world.
Could we be looking at war? One Greek political leader said yesterday that this will not ultimately be a political battle in Greece. The side that has the most guns, he says, is the side that’s going to win.
Historically this feels to me like the 1930’s.
Except that today our weapons are much more advanced. If “advanced” is quite the right word for such deadly machines of killing.