Greece is quickly sliding toward third-world status as austerity measures drive citizens to riot. The International Monetary Fund is concerned that if Greece defaults on its multi-billion dollar debt, the cost to the Eurozone will be tremendous, sending other teetering nations over the edge, reports the Washington Post.
Europe fears Grecian formula
Flagging support for the euro and rampant unemployment has made recovery difficult for numerous Eurozone countries. Continuing to funnel billions of dollars into Greece would be a crushing financial blow to Europe, argued the IMF. In spite of austerity plans in place across the Eurozone, which include unpopular measures like cutting funding for public programs and public employees, signs of recovery have remained elusive. Similar sluggish returns in the U.S. and Japan have damaged the global economy. For Greece to receive any more aid money, the IMF is requiring that the nation follow severe cutback plans to the letter.
“We have entered into a new phase of the crisis that I would term the political phase, where hard political decisions need to be made because the window for substantial policy action is closing. Time is of the essence,” said IMF financial counselor Jose Vinals.
Papandreou hanging on by his fingernails
Amid the chaos of Greece’s slide – it has the lowest credit rating of any developed nation on Earth, according to Standard & Poor’s – Prime Minister George Papandreou attempted to assemble a new cabinet in order to maintain political control. He has announced that he will replace finance minister George Papaconstantinou, who was the face of the government’s austerity plan, with defense minister Evangelos Venizelors. Numerous sources compare such moves to shuffling the deck chairs on the Titanic.
The Wall Street Journal noted that not all the news surrounding Greece and the economy is bad news. German Chancellor Angela Merkel and French President Nicolas Sarkozy have announced their nations have reached agreement regarding a Greek bailout package that has been called the “Vienna Initiative.”
Greek riots intensify as credit collapses
Tens of thousands of protesters blocked Athens’ Syntagma Square Wednesday in effort to pressure Greek Parliament into rejecting the latest austerity measure proposal. If the plan passes, it is believed that it will only provide a short-term fix, as Greece is currently not selling long-term bonds and is depending solely upon emergency installment loans. With Greece’s CCC national credit rating, the interest rates demanded by investors are tremendous.
“There is very little way that Greece can pay back the debt,” said Jonathan Tepper of London economic research group Variant Perception.
Is the US like Greece?
Financial doomsday cultists like to say that the U.S. should watch its p’s and q’s, lest it fall into the same social welfare/entitlement trap that has nearly consumed Greece. The U.S. has a much larger, more diverse economy than Greece, which means that the fall would take much longer. Yet a weak U.S. dollar could hasten the process, resulting in a credit downgrade.