The debt crisis in the euro zone, made up of 17 countries, has entered a new and critical phase, amid fears that Greece could default on its payments and unleash a global economic disaster like the one that followed the bankruptcy of the investment bank. American Lehman Brothers in 2008. What is the real situation? What could happen? Know all the keys to the crisis.
· The latest events
Eurozone finance ministers have told Greece it has to pass tougher austerity measures before a final decision is made on new EU and IMF loans.
which would allow Athens to avoid default, but said the country had to show progress on plans to cut spending, raise taxes and generate other revenue first.
In Athens, there have been street protests against austerity measures.
Today, the Parliament on the Government of the Greek Prime Minister, Giorgios Papandreou.
· What is the problem?
Greece has a sovereign debt of 340,000 million euros, more than 30,000 euros per inhabitant of a population of 11.3 million people.
The €110 billion bailout he accepted last year from the European Union and the International Monetary Fund has proven insufficient and a second package valued at €120 billion is currently being discussed.
With debt equal to 150% of its annual production, Greece holds two world records: the lowest credit rating for a sovereign state and the most expensive debt to guarantee. Its population has run out of patience with an even deeper austerity initiative that has cut public sector wages by 20 percent and pensions by 10 percent.
· Why does this crisis matter internationally?
The longer the crisis continues, the greater the risk of spreading to troubled Eurozone economies such as Ireland and Portugal, which have already been bailed out, and Spain, whose economy is much larger and whose bailout it would be quite a bit more expensive – perhaps too expensive.
A Greek default will hurt banks that hold Greek debt, including the European Central Bank (ECB) and big French and German lenders.
It could also bring credit markets to a standstill, as happened after the Lehman collapse, when banks virtually stopped lending to each other.
The White House said on June 16 that the Greek crisis was acting as a headwind for the US economy, but opinions vary on the level of exposure of US banks.
A Greek default would be a catastrophe and humiliation for the European Union, which launched the euro in 1999 as its most ambitious project and as a symbol of the continent’s unity. That has led some experts to think the unthinkable: that the euro zone could break up, either by the expulsion of Greece or by the departure of Germany, the EU’s big paymaster, which may be tempted to return to its previous currency, the frame.
· Why not bail out Greece again?
The big payers in the EU – mainly Germany, France and the European Central Bank – have had a hard time agreeing a bailout mechanism. European governments are keen to avoid a “hard default” as that could threaten banks across the euro zone and beyond.
So they are tackling a “soft landing” in the form of a debt extension or voluntary refinancing from creditors, but some of the proposals have been criticized as defaulting but under another name.
· Who are the key parties?
Greek Prime Minister Georgios Papandreou last week changed his government to avoid dissent in his socialist party, handing over the economy portfolio to Evangelos Venizelos, a rival within the party. Venizelos is a political heavyweight who led the preparations for the 2004 Athens Olympics, but he has no economic background.
At the European level, the most influential figure is German Chancellor Angela Merkel, as head of government of the strongest economy in the EU. Merkel, who is losing popularity and has suffered a series of electoral defeats in state elections, is under intense pressure from German public opinion, angry at having to pay for Greek mismanagement, hence her insistence that banks must share the load.
Merkel has been accused of stalling Greece’s second aid package, further eroding investor confidence, which could make the bailout even more expensive.
· What about the Greek people?
Public anger over austerity – including early retirement cuts, tax increases and cuts in benefits and wages – has led to frequent strikes and protests, some of them violent.
Unemployment is growing. In a poll last month, 80% of respondents said they refused to make any more sacrifices to get more help from the IMF and the EU. Bank and power company workers, public sector contractors and even doctors have taken to the streets. Private sector employees blame a bloated public sector, civil servants blame tax evaders and many Greeks blame political corruption for the country’s problems.
“The big problem in Greek society is the tendency to hold someone else responsible for everything that goes wrong,” said analyst Theodore Couloumbis.
· How did you get to this situation?
Greece, whose economy has grown strongly but has suffered from corruption and bureaucracy, joined the euro zone a decade ago, linking its economy with other European ones.
In 2009 it entered recession after 15 years of growth and its budget deficit reached 15.4% of Gross Domestic Product (GDP) after a series of government reviews that showed the country’s economy was far worse than it had admitted. previously.
Chronic problems include massive tax evasion. The Minister of Labor has estimated that a third of the economy pays nothing.
More broadly, the Greek crisis reflects an intrinsic weakness in the structure of the euro, a currency area with an interest rate that works for a number of very different economies, and 17 different countries with their own fiscal policy. The failure or survival of the project will depend on how this crisis is resolved.
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