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Grexit or Not? Eurozone Leaders Attempt to Stem Crisis

Posted July 7th, 2015 at 10:48 am (UTC-4)
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For Europe’s Sake, Keep Greece in the Eurozone

The Editorial Board – The New York Times

Greece has suffered and will continue to suffer: its unemployment rate is over 25 percent; its gross domestic product has fallen by a quarter since 2008. What the past several years have shown is that suffering and austerity did nothing to help Greece or its creditors…

From an economic perspective, it is clear what Europe’s leaders should do. They need to restructure Greece’s total debt of 317 billion euros — about 177 percent of its G.D.P. — and keep the country, a member of the European Union and NATO, in the eurozone.

Letting the country leave the euro will, of course, hurt Greece by making its banks insolvent and bringing most economic activity to a halt while the government issues new scrip, most likely followed by a return to a greatly devalued drachma. Nobody really knows how bad things will get in that scenario.

A man holds out a ten euro bill to pay for produce in a fruit market in Athens on July 7, 2015.

A man holds out a ten euro bill to pay for produce in a fruit market in Athens on July 7, 2015.

Now It’s Up to Greece to Deliver a Better Bailout Plan

The Editorial Board – Los Angeles Times

With 61% voting against the terms creditors had offered to extend Greece’s bailout, Greeks said loudly and clearly that they’re tired of the austerity imposed by foreign lenders…. In fact, the vote pushed Greece much closer to exiting the Eurozone, which would be a terrible outcome for Greece, Europe and those who hold Greek debt….

Now, European leaders have to be careful not to give other struggling countries an incentive to follow Greece’s lead into default, potentially costing creditors more than if Greece exited the euro. That’s why the onus is on Greece, not Germany or France, to come up with a plan to restructure its $271-billion debt that can appeal to both sides’ needs.

Without a modified deal, Greece will have no choice but to switch back to its former currency, the drachma, and start printing money. The citizenry might be hit hardest by the inflation that almost certainly would drain the drachma’s value….

How Greek Crisis Could Turn American Tragedy

The Editorial Board – USA Today

Both countries have amassed large debts. Both are run by politicians eager to tell voters what they want to hear about national finances, not what they need to hear. Both have aging populations. Both are familiar with irresponsible banks lending to irresponsible borrowers. And both have been plunging headlong towards debt crises.

Greece is just further along….

Including the amount owed to Social Security, the U.S. Treasury is $18.2 trillion in hock. That puts the United States, along with Greece, in the select group of nations with debts exceeding 100% of annual economic output. That’s not a good place for America to be, especially as its Baby Boomers begin to retire and put even more strain on health and retirement programs….

Unless benefit programs are reined in, America is heading for its own debt crisis … it could arrive in as little as a decade. And then everything will seem Greek to us.

Russian President Vladimir Putin, right, and Greek Prime Minister Alexis Tsipras speak at an economic forum in St. Petersburg, Russia on June 19, 2015

Russian President Vladimir Putin, right, and Greek Prime Minister Alexis Tsipras speak at an economic forum in St. Petersburg, Russia on June 19, 2015

The Danger That Lurks Behind ‘Grexit’

Emma Ashford –

First, it is almost certain that a Greek exit from the eurozone will push the country closer to Russia, deepening divisions within NATO…. Greek leaders have made no secret of the fact that they consider Moscow a possible alternative source of funding if their European negotiations fail….

Russian officials deny that they have offered financial aid to Greece, yet the Russian energy minister just recently announced a $2.77 billion pipeline project in Greece, and Moscow followed this with an informal invitation to Greece to join the BRICs’ New Development Bank.

It is true that the initial impact of a Grexit would simply be to provide Russia with a wonderful propaganda coup … a closer Greece-Russia relationship would also have bigger long-term security implications for the European Union and for NATO….

Closer ties between Greece and Russia raise the possibility that Athens might permit Russian ships the friendly use of Greek ports. This would be a major strategic concern for NATO, allowing Russia to expand its military influence not only in Crimea and the Black Sea, but to obtain a stronger foothold in the Mediterranean.

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