Wednesday, June 13, 2012

Current EU behavior isn't going to achieve what either side wants.

Even if Greece sticks to its reform path, the country will need fresh money this summer, according to Die Zeit's information. If a state insolvency is to be avoided, then the Europeans will need to jump in again. The Bundestag (lower house of parliament) may possibly have to discuss a third Greek package again. A double-digit billion euro amount is being discussed. Greece has already had two bailouts: €110bn in May 2010 and €130bn this year. Worryingly for Greece, the article suggests that the new rescue would come with further economic targets to meet. Greek have been withdrawing €800m a day from the nation's banks, reports CNBC, and stocking up on pasta and canned goods ahead of the weekend's elections. CNBC also claims that a host of biased and widely contradictory polls are being leaked - polls are not allowed this close to the election under Greek law. One apparently puts Syriza way ahead. But a "reputable pollster" told CNBC that this was "nonsense". The polls show that the picture has not changed much since the last polls were published. Parties may be leaking these numbers on purpose to boost their standing....

The EU method of economic reform is like sending in the panzers to stiffen up their army. The ultimate aim is undoubtedly what both sides want, but heaping economic penalties on the poorer members of Greek society will create misery and ultimately lead to political extremism. Either way it appears that the EU has no solution, and no ability to come to one. Current EU behavior isn't going to achieve what either side wants.

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