It was bound to happen sooner or later. The fact that it is Greece will surprise few, but the sheer extent of the deficit and debt – 12.7% and touching €300 billion respectively – will have come as a nasty shock to fellow eurozone members.
At last week’s Summit EU leaders raced to show solidarity with Greece but refused to be drawn on what exactly they would do. Is a bail-out plan on the cards? Will Greece be asked to leave the eurozone? Will Germany have to dig into its ever-sparser pockets?
Greece has been accused of fiddling the books for the last few years, which may or may not be true, but what has been conveniently ignored is the contradiction at the heart of the Euro. Whilst eurozone monetary policy is regulated en bloc from the cosy headquarters of the European Central Bank (ECB) in Frankfurt am Main – 2400km from Athens – fiscal policy remains the sole responsibility of individual Member States.
Inevitably then, Member States are in a position to rack up huge debts if they wish, but then cannot play around with interest rates to rectify the figure. No-one is saying that EU Member States outside the eurozone are sitting pretty, but at least the Bank of England can respond to the UK’s own needs in a time of crisis. Whilst Greece burns, other eurozone members are showing signs of recovery, but how should the ECB balance out this tricky equation?
Meanwhile, Greeks are out on the streets demanding a halt to planned government cuts. The political heat is rising day-by-day, but let it not be said that this is not of the eurozone’s own making.
Meanwhile, eyes are already turning anxiously towards Spain, Portugal, Italy, and even France. Who would want to join the single currency now?