Will the economical collapse of Greece cause the end of the Euro?
- The euro zone
- Greece's economic framework
- The expected effects
- Evaluating the results
- Macroeconomic imbalances
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 Euro Will Survive. New York Times. Retrieved December from http://www.nytimes.com/roomfordebate/2011/11/01/will-greece-destroy- the-euro-zone/the-euro-will-survive Schadler, S. (2005). Euro Adoption in Central and Eastern Europe: Opportunities and Challenges. International Monetary Fund. [...]