The European Union took steps Wednesday to rein in the fiscal chaos that has brought Athens to the brink of financial disaster in recent months. Leaders of EU member states agreed at a summit in December that Athens should be left to its own devices to deal with its deficit crisis, but the European Commission moved this week to invervene to fix Greece’s fiscal mess out of fear it could spiral into a systemic crisis for the euro.
...it appears the European Commission has come to the conclusion that Greece is Europe’s own version of Lehman — it is simply too big to fail.
Economically, of course, Greece is a dwarf, producing a meager 3 percent of the EU’s economic output. But a bankruptcy could have the same kind of knock-on effects as the bankruptcy of a major US investment bank. One couldn’t rule out a domino effect in Spain, Portugal and Italy. US economist Nouriel Roubini pessimistically wrote of “Europe’s sinking south.” It’s an experiment the EU cannot afford.
Greece’s problems are deep and it will take time to solve them. No European country would be able to do what is being asked of Greece: a complete reform of its health and pension systems and the streamlining of its economy within just a few years.
It remains to be seen whether the Greek population will go along with the tough measures announced by Prime Minister Giorgos Papandreou in a television address on Tuesday. The first step foresees the cutting of salaries in the public sector by 4 to 6 percent. The budgets of all ministries are to be slashed by 10 percent and the retirement age raised. Taxes on fuel, tobacco and alcohol will also rise.
Even Ireland, which ran into serious problems of its own last year, was better off. Public salaries there were cut by a whopping 20 percent, but civil servants in Ireland were among the best paid in Europe. Furthermore, the country had already made fundamental changes to its economy by focusing heavily on the service sector — changes that Greece has yet to address.
noting both the yin and yang of futurity, watching cover ups as they happen, fighting back, and wooking pa nub in all de wong places. that's what i do.
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