The euro zone is now frantically bracing itself for the imminent fall of the Greek government. Faced with the possibility of Greece vouching for a fully fledged non-payment of debt and euro zone departure as opposed to a debt deal, the outstanding euro zone members have to choose whether to remain together or disintegrate. The chances are if they stick together, they will survive (Rossi, 2011).
Will the disintegration of the Greece government obliterate the euro zone? It surely could. Italy's recoupling to the side-line is in progress, making it the current focal point of the sovereign debt predicament (Harrison, 2011). Meanwhile, the euro zone had previously started a double dip recession, which is now causing Portugal and other fringe economies to neglect their deficit targets. Increasing austerity measures under those conditions means civil strife would probably spread to these countries as well (Harrison, 2011).
Nevertheless, the euro zone's continued existence has little to do with Greece. The Greek economy is too tiny to cause any evident impact on the euro zone, and even the extensive and considerable financial contagion of them defaulting can be absorbed. A debt deal may not be appealing to Greece, but an increase in bailout funds is capable of taking care of any immediate consequences of a Greek default. Containment has been addressed and would focus on supporting other indebted states (Kolb, 2009).
[...] Will the economical collapse of Greece cause the end of the Euro? Abstract The future of the euro is highly uncertain at the moment. The immense debt problems of economies such as that of Greece are pulling down the rest of the Euro zone. Could the euro finally be on the brink of collapse? The euro was really a very interesting experiment. Never before have we experienced a circumstance where a monetary merger has been tested in the absence of the political and fiscal union being the major influencer. [...]
[...] What is definite is that Greece joined the euro zone when they were absolutely unprepared. After joining, Greece behaved in a manner inconsistent with economic reasoning and converse to the rules of the workings of a monetary union. The euro is not the basis for the Greek crisis. However, the administrative arrangements undoubtedly failed. Additionally, the progression of the catastrophe has been exacerbated by the euro zone's intrinsic weakness in the face of asymmetric turbulence and the nonexistence of frameworks for early forewarning and swift intervention. [...]
[...] The principal motive for Greece continuing to hold an important role in discussions over the euro zone's outlook is that it instigates the question over member states' capabilities to determine and resolve the innate problems of economies that are performing poorly. The weight that Greece can still exert is a manifestation effect: If Greece exits, will the result be disastrous or could the economy be galvanized into a better performance, as those who favor exit appear to believe (Harrison, 2011)? Given Greece's economic framework and historic track record before incorporating the euro, which are very dissimilar to those of non-euro E.U. states like Sweden and Britain, its forecast outside of the euro zone does not appear bright. [...]
[...] This Could Be the End of the Euro. New York Times, Is The End Of The Euro In Sight? (2011). Retrieved December from http://theeconomiccollapseblog.com/archives/is-the-end-of-the-euro-in- sight Kolb, R.W. (2009). Sovereign Debt: from Safety to Default. Hoboken, NJ: Wiley. Kotios, A., Pavlidis, G., & Galanos, G. (2010). Greece and the Euro: The Chronicle of an expected Collapse. Retrieved 8/12/2011, from http://www.springerlink.com/content/a015286m84252287/ Rossi, V. (2011, November 1). [...]
[...] The Expected Effects Prior to Greece's admission to the union, there was a common consensus on the projected benefits. The cutbacks on transaction costs and the abolition of uncertainties in exchange rates were likely to enhance production and trade. The shift of responsibility to the new common institutions from monetary policy would liberate Greece's monetary policy from political pressures at home, thus allowing for price stability. Monetary steadiness was expected to improve the predisposition to invest. Evaluating the Results Without doubt, Greece has reaped from the rewards that a single currency region offers, such as the eradication of currency uncertainties and risks as well as the abolition of conversion costs arising from trading with other countries in the euro zone. [...]
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