Next Big Bash Economic Tsunami: Banking Union in Euro!! - Will Euro Survive Again?

     The Next Big Bash of Economic Tsunami is clouding over in the European Area. Yes, if you are following the European Crisis then by this time you would have guessed what I was talking about, the BANKING UNION in Euro. In last week Economist Print Edition (June 30^th – July 6^th, 2012) there was an article titled “Bankers of the Euro Area, Unite!” (Please click on the quote to read full article). It talks about the prospects of Banking Union and the reason behind forming this Bank Union. It gives insight on what are the problematic issues over the banking union. 

       Mr. Herman Van Rompuy, the President of European Council, published proposals of banking union with centralised banking supervision and to avoid banking collapse or run. Mr. Van Rompuy thinks that the banking union ought to cover the whole European Union (EU) to avoid fragmenting  Europe's single Market in Financial Services. There is another article titled "Without Banking Union the Euro is History" by Protesilaos Stavrou. The article talks about the need for recapitalisation of Banks and Banking Union. It went on to conclude that “A banking union, or at least steps towards that direction are of cardinal importance in order to escape from this policy-made morass, otherwise the euro will soon belong to history, with tragic results on the entire global economy.”

       Many Economist and Analyst say that banking union is the only option left for the Euro to survive. After reading these articles few questions raised in my mind

1. Is recapitalisation of banks is tougher than Banking Union ?

2. Will all the European countries accept for Banking Union? - Remember, the banking liabilities in Britain, Switzerland and Denmark are 4 to 5 times larger than their Nation Economies. Since, they have their own Central Banks they can print money if they needed and this cannot happen after Banking Union.

3. If Banking Union had occurred what will happen to those countries that are in verge of bank panic and those countries banks which are earning more profit? - Remember, a bank run is the sudden withdrawal of deposits of just one bank. A banking panic or bank panic is a crisis situation which occurs when many banks suffer runs at the same time, as a cascading failure. This will result in Economic Crisis. 

          

        The Banking Union may be helpful for the Euro to survive at present and it may make them to move further to certain period of time. But, the real question is Whether this Banking Union alone will solve the problem of Euro? If you ask me the same question I would say NO. Banking Union alone will not solve the problem but it may give further scope for Fiscal integration.What's your Call? Kindly let me know.

Greek debt is running out of time - Unending Austerity Measures - When it will End?

The Austerity Measures for Greece is still continuing without any opposition. In Greek Mythology there was a king named Sisyphus, who condemned by the Gods to roll a boulder up a hill for all eternity. The name is used now to describe a never-ending Task. This is what now happening in Europe in the case of Greece. There was talks between European officials, during last Friday (i.e. 13.01.2012), aimed at reaching agreement with creditors to cut Greece's debt burden.

The talks are seeking to slice €100 billion ($126.7 billion) from the Greek government's €350 billion in debt without delivering an ultimatum to private bondholders, who together hold more than €200 billion of bonds. (For Full Article here)

Greece's continued access to bailout loans depends not only on delivery on its austerity promises but also on negotiations with private creditors on a bond swap deal aiming to cut its debt by 100 billion euros ($129 billion.) It needs to get an agreement soon if it is to secure more rescue loans, with a bond repayment of 14.5 billion due on March 20 that the country currently lacks the cash to pay. (For Full Article here)

The International Monetary Fund (IMF) is planning and proposing to lend a $1 trillion to insulate the global economy against any waning of Europe’s debt crisis, according to an official at a Group of 20 nations.  The interesting part is that IMF is pushing China, Brazil, Russia, India, Japan and other oil-exporting nations to make the huge contribution for this lending. It is expected that the agreement would stuck at the meeting of G-20 Finance Ministers and Central bankers which is going to held on February 25-26 in Mexico city.

My Perception

The IMF as a financial watch dog is doing its work more sincerely than any other institution across the globe. But, the real question is, whether it can avoid the financial catastrophe in Europe. Those who follow the Greece Crisis knows that the officials from the European Union and International Monetary Fund, which are lending money to Greece to keep it from bankruptcy, is expected to coerce the government to have faster cost-cutting measures. Greece had access to the bailout loans not only on the delivery of its austerity promises but also on the negotiations with the private creditors on bond swap deal aiming to cut its debt by 100 billion Euros. Remember that, Greece needs second bailout of 130 billion euros in order to pay its creditors. Despite that, IMF is ready and planning to lend $ 1trillion to wane the Europe’s debt crisis. The question which is frequently asked by many people is how long the current and additional austerity measures will be carried out. Interestingly, many of the European countries itself are not ready for further austerity measures. 

I again and again repeat the quote of Ludwig Von Mises, from his book Human Action, "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

People may say sooner (or) later, that in order save Euro we may not continue the austerity measures.  Greece should be either ready for Voluntary abandonment, if at all it wants to save Euro and other European nations else there may be total Catastrophe.

Can Europe Revive and Euro Survive?

In last week edition (i.e. 11.11.2011) of Economist an Article entitled "Staring into the Abyss" with sub-sentence "The Euro Crisis might wake Europe up. But more likely, argues Edward Carr, it will be lead to compromise and decline". The article gives us more clear picture on the on going Euro Crisis and how Europe should take necessary steps to get out of the crisis. The authour says that "The euro zone still has the capacity to stop this run on its banks and governments. As a block, it is less indebted than America and its public-sector deficit is lower." and also he feels that "It has the money to fortify its banks against the default of Greece—and Portugal and Ireland, if need be. And it is minded by the European Central Bank (ECB), which can in principle stand behind those vulnerable governments by buying their debt in unlimited quantities on the secondary market." 

The authour further states that "While the world waits for Europe to make up its mind, catastrophe is in the air. It could take many forms. A country might storm out of the euro—which the treaty forbids, but who could stop a determined government? European banks might suffer a fatal loss of confidence. Italy or Spain might become unable to borrow on decent terms. Or a government trying to impose austerity might be replaced by one that rejects it. Any of these could cause contagion and plunge the world economy into depression." In the article, it is stated that ' ...... writes David Marsh, authour of a history of the Euro, "Europe's Melancholy Union." ' It concluded that "Can Europe turn back from the abyss? Only if the core countries will support the rest as they submit themselves to radical political, social and economic reform. Nobody should be under any illusions about how difficult that will be." 

My Reflections

The present Euro crisis is becoming deeper with vigour. The ongoing Euro Crisis will be one of the biggest crisis ever happened in the history. Before going further, I would like to quote few important phrases and quotes.


I remember the quote of Friedrich August Hayek in his paper (later published as a book) entitled "Denationalisation of Money - The Argument Refined". The paper/book was An Analysis of the Theory and Practice of Concurrent Currencies. In that paper/ book, F.A. Hayek had mentioned that

"During the Middle Ages, however, the superstition arose that it was the act of government that conferred the value upon the money. Although experience always proved otherwise, this doctrine of the valor impositus was largely taken over by legal doctrine and served to some extent as justification of the constant vain attempt of the prince to impose the same value on coins containing a smaller amount of the precious metal." (chapter III, The Origin of the Government and Prerogative of Making Money)

As we all know the fact that the Euro was introduced coercively & its purchasing power is determined by the group of experts. If we re-read the above paragraph of Hayek then we can understand  clearly what exactly happens when we move from one currency to the other (whereas here, in case of Euro, many currencies to one singly currency). It's not easy to determine the value of purchasing power when group of countries moved to one single currency, yet, we should really appreciate the Euro nations who had done it more tactfully without any haphazard, esp., at that point of time. 

As I quoted earlier somewhere in my earlier posts, that in 1999, the year leading up to the launch of the euro, Milton Friedman stated that he did not believe the Eurozone could last ten years and even as late as December 2005 (less than one year before he died at 94 years of age). He said that  

"The euro is going to be a big source of problems, not a source of help. The euro has no precedent. To the best of my knowledge, there has never been a monetary union, putting out a fiat currency, composed of independent states. There have been unions based on gold or silver, but not on fiat money—money tempted to inflate—put out by politically independent entities" (Interview with New Perspectives Quarterly Magazine, 2005)

He also stated (after one year of launch of Euro) that 

"If we look back at recent history, they’ve tried in the past to have rigid exchange rates, and each time it has broken down. 1992, 1993, you had the crises. Before that, Europe had the snake, and then it broke down into something else. So the verdict isn’t in on the euro. It’s only a year old. Give it time to develop its troubles."

Now, coming back to my reflection of existing crisis, still many economist believe that Europe have more resilient and also believe that Euro may survive . No doubt that (as the authour of the above mentioned article said) "Euro zone has the money to fortify its banks ...... ", but, the spread of crisis had already become wider. If Euro zone should come out of this crisis (remember the recovery cannot be quick) then   the major countries of the Euro zone should make more sacrifice  and should give complete support to the suffering nations. But these cannot happen easily, because, no Euro zone countries (as of now) are ready to support the crisis affected nations and they don't want there countries to suffer.

Two important things should happen if Euro wants to survive, as I always said earlier, Greece should default. Many people may feel this is too pessimistic view, but, if this does not happen now, it will happen later and that will affect the Europe and Globe severely. Secondly, the major Euro zone countries should  fortify the banks in order to give more support and save other weaker nations (except Greece, because the spread of crisis is much deeper than what they expect to be). Even if they follow these steps, we cannot say that the Europe will revive and Euro can survive. 

As the proverbs say "Time is the Healer; Time is Great Physician", so only time can say whether Europe will revive and Euro can be saved. Let's see how the Group of Experts act to save Euro and Europe.

Europe is in Jinx - Greece should Default!

Europe, Europe, Europe!!!!! Europe is everywhere in the news for the past few months, since Greece Crisis. The Trouble is creeping up faster than expected and faster than inflation. As everybody knows that it was started in Greece and spreading rapidly all over Europe now. Yesterday (i.e. 31.10.2011), Organisation for Economic Co-operation and Development (OECD) slashed its growth forecasts for some of the world’s biggest economies. It said that the “without decisive action the outlook is gloomy”. At the G20 Summit the OECD had warned that bold action needs to be taken to ward off another recession in Europe.

In its forecast, OECD said that the economic growth in the Eurozone would stall at 0.3 percent next year but only after just 1.6 percent growth in this year (the current forecast is down from the OECD’s May forecast of 2 percent growth in 2012). It is believed that this will remain weak in the US, while emerging markets will see slower growth than before the financial crisis began. It also said that the growth in G20 nations will have a gradual decline of 3.8 percent in 2012 from 3.9 percent this year, although it is expected to accelerate to 4.6 percent in 2013. The OECD added that the scenario could be worse if the Eurozone rescue deal fails to restore confidence in market. 

In its appropriate policy response it suggested the following to resolve the Euro area crisis: 

1. Important to clarify and implement fully and decisively the measures which was already announced. 
2. It should break the link between sovereign debt and banking distress.
3. To deal with Greece.
4. Europe should ensure that the sovereign debt crisis does not spread to other European countries.
5. To secure appropriate capitalisation and funding for banks

It further added that “Detailed information is needed on how the package will be implemented” which was announced last week (i.e. on 26.10.2011) to resolve the crisis.

My Reflection:

I am not surprised by the OECD forecast, but, I am surprised by the policy response for the crisis. If one follows the European crisis from the beginning then one can easily point out some of these policy responses without any further analysis of the present condition. What really startled me was that the OECD, being one of the world reputed organisation, had made such naive suggestions as a policy response to Euro Area along with a note that detailed information about the package is needed on how it will be implemented. Many of the people, not only from Economics background, know that if Europe wants to move from crisis then it has to deal with Greece and it should stop the sovereign debt crisis spreading to rest of the European countries. It is really astounding to hear these things from a world reputed organization. I know that I am not expert on any of these lines, but as a student of economics and also the person who follows the happenings I feel that something can be added. They are as follows: 

1. If the Europe needs to avoid another recession, then the foremost thing it has to do is to strengthen its banking system along with sound monetary policy (keeping in mind that one policy is for all the Euro countries, so more careful measures of policy needs to be taken). 

2. To restore the people's confidence in the system, the policy measures should be in such a way that it should generate more employment and also should stimulate the investment activity in the economy.

3. The foremost thing which I feel should happen at least now is allow Greece to Default. I again repeat the quote of Ludwig Von Mises, from his book Human Action, "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."  

Perfect quote, "..... a voluntary abandonment or later as a Final and Total Catastrophe ......." , even though he said this for credit expansion, this  is perfectly suitable for Greece considering the depth of the current crisis. The time has come and it is now, that Euro should allow Greece to default else the entire Europe will definitely fall in another recession which may lead to another global crisis soon. Let the time and the policy makers decide the fate of the Europe and the Global Economy.

Will Euro Survive?

Last year, when I started to write this blog, (in May, 2010 - more than a Year Now!) in a post titled "Austerity Measures - everywhere around Europe" I had mentioned that I would not be surprised if EURO fails or dissolved. The current crises in Europe are showing some sign of Euro breakdown, even though it may not happen much sooner. Analyst and economist may feel this is a skeptic view, but, truth is always hard to accept.

Before going further, let me give a brief introduction on Euro "Euro is the official currency of the Eurozone which consist of 17 countries out of the 27 member states in the European Union. The euro was launched on 1 January 1999, when it became the currency of more than 300 million people in Europe. For the first three years it was an invisible currency, only used for accounting purposes, e.g. in electronic payments.  Euro cash was not introduced until 1 January 2002, when it replaced, at fixed conversion rates, the banknotes and coins of the national currencies like the Belgian franc and the Deutsche Mark" (Source: ECB website)

Coming back to the topic, that many economists and analyst now feels that Euro may fail and soon it may get dissolved. But, Professor Milton Friedman, Nobel laureate and Famous Monetarist, had this view even before Euro came into operation. In his interview to ABC Australia on 17 July 1998 that 

"In establishing the common currency area, the Euro, the separate countries are essentially throwing away this adjustment mechanism. What will substitute for it?

Perhaps they will be lucky. It may be that events, as they turn out in the next 10 or 20 years, will be common to all the countries; there will be no shocks, no economic developments that affect the different parts of the Euro area asymmetrically. In that case, they'll get along fine and perhaps the separate countries will gradually loosen up their arrangements, get rid of some of their restrictions and open up so that they're more adaptable, more flexible."

Friedman kept his view unchanged even in 2005, less than one year before he died (at age of 94 years)

"The euro is going to be a big source of problems, not a source of help. The euro has no precedent. To the best of my knowledge, there has never been a monetary union, putting out a fiat currency, composed of independent states. There have been unions based on gold or silver, but not on fiat money—money tempted to inflate—put out by politically independent entities. - Interview with New Perspectives Quarterly Magazine, 2005"

Some economist felt that Friedman was pessimistic in his view, and few said that Euro will not break-up or dissolve. They support their argument with the following stance that "Countries in the European member states are incredibly linked far beyond just sharing a common currency. The Borders of the countries have essentially been erased, the trade and even citizens can move freely between the Eurozone countries." It is true that Prof. Milton Friedman’s prediction is yet to come true, but it may happen sooner or later.

The current crises are showing the sign of break-up in Euro currency in the near future. The Greece crisis, which is slowly spreading to the rest of European member countries, will eventually make the member economies to move to their own currency after certain period of time. Still it’s too early to say how things will take its own shape.

Greece Austerity Measures - An Analysis

For the past one month, there is severe protest happening in Greece against the Austerity Measures. European Central Bank (ECB) and IMF had asked Greece to take essential Austerity Measures before they claim the bail-out package. ECB watched Greece very closely on their decision on austerity measures.

Let us have a look on the Austerity measures. The Austerity measures are mainly classified into 2 parts, one is Tax Increase and other is slash in Public Spending. They are as follows:
Tax increases include

• A solidarity levy: At 1% for those earning between €12,000 (£10,800) and €20,000 a year, 2% for incomes between €20,000 and €50,000, 3% for those on €50,000 to €100,000, and 4% for those earning €100,000 or more. Lawmakers and public office holders will pay a 5% rate.

• A lower tax-free threshold: People will now pay tax on income over €8,000 a year, down from €12,000. This basic rate of tax will be set at 10%, with exemptions for those under 30, over 65, and the disabled.

• Sales tax: The VAT rate for restaurants and bars is being hiked from 13% to the new top rate of 23%. This rate already covers many products in the shops, including clothing, alcohol, electronics goods and some professional services.

Spending cuts include:

• Public sector wages: Salaries will be reduced by 15%.

• The public sector wage bill: The goal is to cut 150,000 public sector jobs, through a hiring freeze and abolition of all temporary contracts. This should cut the total bill by €2bn by 2015.

• Social benefits and pensions: The retirement age is being raised to 65. Increased means testing, and cuts to some benefits, will reduce the total amount spend on benefits by €1.09bn in 2011, then €1.28bn in 2012, €1.03bn in 2013, €1.01bn in 2014 and €700m in 2015.

 (Source: Guardian.co.uk)

 The current Greece crisis raised few questions like, whether the Greece will take the Austerity measures despite of huge protest in the country? whether it will default or will continue with Euro?

Many economists and experts expressed that Greece have only one solution and that is to leave EURO and Default. But, leaving EURO is not easy and unfortunately, not an option for Greece at this point of time. In 1998, the founding members of the euro-area agreed to lock their exchange rates at the then-prevailing levels. Leaving the Euro means breaking its commitment and the very  motivation for leaving would be to change the parity. Leaving Euro will not only allow Greece to deal with sovereign debt crisis, but also it will be in middle of a bank run, while everyone would be trying to avoid ending up with devalued drachma (Greece currency before joining EURO).

If Greece leaves, then the other countries like Ireland, Portugal and may be even Spain might also follow on the same line (because they are also looking for the bail-out package since their economy is also in tussle to pay off their debts). This will lead to banking crisis in all these countries, by holding their debts which might lead to banking crisis in UK and German (because they are the major creditors for these countries), which will put entire Europe in crisis. These are the some major constraints and problems why Greece cannot leave EURO.

But, the economist who expressed their views that Greece should leave EURO have their own reasons. If the Greece does not leave EURO at the this time, when the economy is already very weak, then there is a risk that the economy will spiral down further in the crisis. It's hard decision which Greece had made for Austerity measures, since they did not have any other better option.

I remember a famous line of Ludwig Von Mises in his book Human Action, which is as follows:

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

How True it is, a voluntary abandonment or later as a Final and Total Catastrophe of Currency System, even though he said this for credit expansion, this line is perfectly suitable for Greece.

European Economy - An Overview

           Today while I was browsing over the net on European Economy; I found a document titled “European Economic Forecast”. This report gives us a detailed study about status of European economy and International Environment. I also browsed some other materials where I found some information on EU and Euro Economy. The GDP growth rate have been forecasted to 1.7% and 2% for 2011 and 2012 respectively within EU and 1.5% and 1.8% for 2011 and 2012 in Euro Area.

       

          Inflation is projected to average 2% in the EU this year and next, easing to around 1.75% in 2012. For the euro area, a rate of 1.75% is expected in both 2011 and 2012. In forecast a modest improvement is expected with employment growth of almost 0.50% and around 0.75% is in 2011 and 2012, respectively. The unemployment rate is projected to gradually fall, from some 9.50% this year to about 9% by 2012.

         It is expected that (EU as a whole) a deficit of slightly above 5% of GDP in 2011 and 1 percentage point in 2012 as the recovery gains ground.

Is Europe Following India's Footstep?

The term "Flagship" normally denotes a lead ship.  The term has originated from the custom of the commanding officer in Naval who have right to fly a distinguished flag. The term Flagship scheme means the schemes which drive the economy towards faster growth. India is the first country to have flagship schemes. In India, (whoever follows the budget will know that) we have 8 flagship schemes. They are 1. Sarva Shiksha Abhiyan (SSA) 2. Mid-Day Meal (MDM) 3. National Rural Health Mission (NRHM) 4. Integrated Child Development Scheme (ICDS) 5. National Rural Employment Guarantee Scheme (NREGS) 6. Jawaharlal Nehru National Urban Renewal Mission (JNNURM) 7. National Rural Drinking Water programme(NRDWP) 8. Total Sanitation Campaign (TSC).

Now, the Europe has announced an initiative called “Europe 2020 flagship initiative”. They have seven flagship initiatives and they are:

1. Innovation Union: to improve framework conditions and access to finance for research and innovation so as to ensure that innovative ideas can be turned into products and services that create growth and jobs.

2. Youth on the move: to enhance the performance of education systems and to facilitate the entry of young people to the labour market.

3. A digital agenda for Europe: to speed up the roll-out of high-speed internet and reap the benefits of a digital single market for households and firms.

4. Resource efficient Europe: to help decouple economic growth from the use of resources, support the shift towards a low carbon economy, increase the use of renewable energy sources, modernise our transport sector and promote energy efficiency.

5. An industrial policy for the globalisation era: to improve the business environment, notably for SMEs, and to support the development of a strong and sustainable industrial base able to compete globally.

6. An agenda for new skills and jobs: to modernise labour markets and empower people by developing their of skills throughout the lifecycle with a view to increase labour participation and better match labour supply and demand, including through labour mobility.

7. European platform against poverty: to ensure social and territorial cohesion such that the benefits of growth and jobs are widely shared and people experiencing poverty and social exclusion are enabled to live in dignity and take an active part in society. (Source: Europe Commission website)

These seven flagship initiatives will commit both the EU and the Member States. In order to achieve the goals of Seven Flagship Initiatives within the stipulated timeframe i.e. 2020, the Europe Union and Member countries need stronger governance and also need to strengthen the coordination within economic and monetary union. No doubt, Europe is following India’s footstep on flagship schemes/ initiative. But, the success of their Flagship initiative mostly depends on the effectiveness of the governance and coordination within the union.

"Greece Crisis - Bailout - Is it worth?" - Greece May Survive, But the Bailout Won’t Help It Heal

This is in continuation of the Posting "Greece Crisis - Bailout - Is it worth?". In this posting there arised few questions whether this bailout will helpful? Whether Greece will survive? Interestingly, today i have read an article on Newsweek, which was publised on 10th May 2010 by Stefan Theil.

The last para of article is as follows: "Not talked about much, but at the heart of all this is the festering problem of Europe's banks. Unlike the U.S. and U.K., major Eurozone countries like France and Germany have to this day refused to subject their banks to stress tests, or provide for any kind of transparency about the true health of their financial sectors. According to the IMF, a larger share of bad assets is still hidden on the books of European banks than American or British ones. (Those bad debts are a source of embarassment to Europe's politicians, as they are likely concentrated in state-owned banks.) If France and Germany were more transparent about who owns which shaky government bonds, it would be far easier to calculate and prepare for the effects of, say, a Greek government bankruptcy, which unlike a banking crisis is a fairly straightforward problem for a financial system to resolve. Instead, because Europe still refuses to go public with the lingering problems of its banks, each impending crisis brings more uncertainty and the threat of systemic failure. Because politicians and regulators refuse to shed light on their banks, this crisis will likely linger"

You can read this full article here -
http://blog.newsweek.com/blogs/wealthofnations/archive/2010/05/10/greece-may-survive-but-the-bailout-won-t-help-it-heal.aspx

Austerity Measures - everywhere around Europe!!!!!!!!

If you see any newspapers today on world economy, then you can notice one important thing, that is, Austerity Measures - everywhere around Europe. After the Greece Crisis, all other european nations (including England) are very much alerted on the Fiscal Debt of their Nation.

Spain unveils billions in deficit cuts to halt eurozone crisis fears. Spain will slash public spending by €6bn and cut civil servants' by 5pc salaries this year as part of a plan to ease fears the country could slide into a debt crisis like that of Greece.Spain's Prime Minister Jose Luis Rodriguez Zapatero ordered a five percent pay cut for public workers as it ordered tough austerity measures in a bid to slash the national debt. Premier Jose Luis Zapatero told a stunned nation that public sector pay will be reduced by 5pc this year and frozen in 2011. "We must make an extraordinary effort," he said. Pension rises will be shelved. The country’s €2,500 baby bonus will be cancelled. Aid to the regions will be slashed and infrastructure projects will be put on ice. Mr Zapatero’s own monthly pay will fall 15pc to €6,515.
(Source: http://www.telegraph.co.uk/. )

While Spain is on Five Percent pay cut for public workers, Speaking at one of the four press conferences he gives a year, Mr King said that cutting the deficit is the 'No. 1' issue and that he had advised the George Osborne, the new Chancellor, this morning that the cuts should start this year. Some excerpt from telegraph - Bank of England (BOE) Governor said that "The lesson from Greece is that the deficit is the 'No. 1' issue" The Governor of the Bank of England warned that the next few years are going to be 'painful', as he welcomed the new government's plan to tackle the deficit this year. "The lesson from Greece is that the problem had been dealt with three months ago it would not have become as serious as it subsequently became," Mr King said. "The crucial thing is to prevent contagion from Greece to other euro-area countries. But those measures only provide a window of opportunity."

Now, despite of so much alert over the Debt crisis and Austerity measures will Europe survive from the crisis? Another big question is how long the EURO can survive? It’s really a big testing time for European Union to maintain it’s stability within their Union Economies. It will not be surprising for me at all when i hear the news that "EURO fails or Dissolved". Ofcourse, it still very early to say anything like that, only time can provide answer for all these questions.

Greece Crisis - Bailout - Is it worth?

The GREECE Crisis is becoming much more worse day by day. Recently, many economist started comparing this crisis with Argenitina's Default Crisis (1999-2002).

Recently IMF and European Finance Ministers Agreed to bail out Greece. Many countries were Unhappy with the Decision of IMF, since, Greece is not facing the Balance of Payment problem, rather, It faces huge Fiscal Debt. Many Economist feel that whether this bail out package is really worth? Whether this will stop the Greece from becoming Default? Now, Greece have also started adopting austerity measures, but, whether it will work? and more importantly whether Greek will walk out of EURO?

Well recently, Paul Krugmen in his article in NY Times (dated 6th May 2010, said that " The bad news is that Greece’s problems are deeper than Europe’s leaders are willing to acknowledge, even now — and they’re shared, to a lesser degree, by other European countries. Many observers now expect the Greek tragedy to end in default; I’m increasingly convinced that they’re too optimistic, that default will be accompanied or followed by departure from the euro".(For Full Article you can read - http://www.nytimes.com/2010/05/07/opinion/07krugman.html)

We need to wait and see whether the Greece bailout package is worth or it will default!!