Greece, test for the euro
The woes of Greece to the euro is the first real test of its young history. In ten years, the European single currency has successfully resisted the shock of a rare violence: attacks of September 11, 2001, collapse of the tech bubble, the subprime crisis … Nothing says that the franc, the lira or the peso would through free events such as the euro has done. But whenever these shocks, left the United States, came from outside. But now the danger lies within the zone itself. And gives rise to a nagging question: Greece will she forced eventually to leave the euro? A priori not. For a small country, belong to a large currency area is a rare opportunity. Until the stress becomes so high that it is cheaper to get out.
Athens faces a double challenge. First restore its credibility.Since its integration into the eurozone in 2001, the country has ceased to be faulted on the reality of its economic statistics. Showing at 6% in early years, deficits would in fact 12.7% of GDP, according to the latest tally of the national statistical office. A deception that shows Greece as a kind of "stowaway" in the euro area. And that makes it particularly difficult direct assistance from a European state. Public opinion of the most virtuous Germany, Netherlands or those worried about their own fate as France or Italy will struggle to agree to fund a country that gives the impression of not playing the game .
The second challenge for the Greek government is to prove its willingness to restore as soon as its public accounts.In theory, a State has two instruments to reduce its deficits: monetary policy and fiscal policy. Coin money helps finance its budget while offering the opportunity to play the currency markets by devaluing its currency to boost competitiveness. A move that boosts the growth and cause some inflation. The ideal instrument to reduce debt … by which Greece can not count because, like all countries in the euro area, monetary policy is the prerogative of the ECB in Frankfurt.
Leaves only the weapon strict budget. In this case, the organization of drastic cuts in state spending. The government of George Papandreou as he means? CRAs in doubt, especially as the social climate is strongly degraded in the country, making it particularly difficult acceptability of drastic measures.Failing to do so by itself, the Greek government will have only one solution: to put in practice under the tutelage of Brussels. In a carrot and stick, the European Commission could generate outside pressure strong enough to induce Greece to reform in depth, as the IMF has so often done in the past with countries in crisis. At the price, most of the time of painful adjustments. The question will then arise of how far the Greek people will accept sacrifices to stay in the euro area? The cost to benefit is not so obvious.
Today, the Greek state will refinance at a rate of 5.77% in ten years. A level closer to that of Hungary or Latvia as Germany. In other words, the protection offered by the euro area is almost over.Out of this system could, ultimately prove less expensive what remain, rising long rates may be offset by a devaluation immediately making the country more competitive. While giving the Greeks a sense of finding their democratic sovereignty to which they are so attached since the birth of their civilization.
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