Economic: Greece and the EU Crisis

Economic

In the recent era of expanded globalization, the negative effects taking place some economies inevitably affect the whole world. This is most evident with the recent European economic crisis, where inability to control financial problems in states such as Greece is affecting the economies of its prosperous neighbors and even the United States. The economic stagnation in smaller debt ridden nations such as Portugal and Greece has continued to expand, now threatening some of the regional powers like Italy and Spain. Yet unlike in previous situations of economic peril where the United States has led the way, no one has stepped up politically to provide a sensible solution to the problem. As the risk of an EU economic catastrophe increases, the EU begins to focus on Greece whose, albeit small, economy will set the trend for the events proceeding in the European Union.

The root of the problem stems from the EU leaders inability to create a common solution to meet various states individual problems while satisfying the rest of the members. For example when Greece is bailed out to repair its economy it receives certain conditions from the EU community. Yet when Greece does meet the conditions set forth and requests even more bailout funds they come in conflict with their original lenders. Unlike America, where a single national government had a unified response to its economic crisis, Europe has a plethora of leaders each with different perspectives and internal political pressures, causing a consensus to be elusive if not impossible.

The EU leaders are confronted with a decision, withdraw Greece from the EU or keep it in. If they keep it in considerable funds will have to continue with no feasible solution in sight. On the other hand Greece is removed from the EU then the situation is highly uncertain as its currency will have to change and devalue itself. This situation leads to conflict whether contracts with Greece will be paid in the devalued Greek currency or in a value equivalent to the contract in Euro’s.

So far the situation remains unsustainable, as the Euro continues to fall compared to the dollar, and the Greek economy continue to suffer. In my opinion, the solution would be to pay back the bailout in the form of services rather than currency. By this I mean instead of paying back the Germans a set amount of money they received, the Greeks would pay back by offering expense free vacations to Greece. Thus a variety of companies, ranging from hotels in Greece to airlines in Germany would benefit all while paying the debt.

Hyperlink: http://www.charlierose.com/view/interview/12402