EU leaders have gathered in Brussels for an emergency summit on how to come up with the cash promised for a second bailout to Greece. While leaders squabble, failing to agree on how to resolve the crisis, the euro’s future hangs by a thread.
The single currency will be dead within two years, warn analysts.
“Within the European debt crisis, there’s a very serious threat now that the euro might disintegrate and that the eurozone might collapse,” says Marco Becht from the Center for Economic Policy Research.
It is already too late to save the Greek economy, according to a majority of leading economists and experts polled by RT.
“Greece is really going down the drain completely. The debt is escalating, the deficit is totally out of control,” observes Johan Van Overtveldt, editor of Trends Magazine.
“If I could give you the analogy that they were like somebody with a gambling or a drinking problem. The Greek people are not prepared to accept it. It is a cultural thing. So now we find ourselves with someone with a drink problem, but a huge debt as well, and the problem wl only ever get worse till you confront reality and say ‘Look, they don’t fit in the eurozone, they are not going to fit together with Germany in one single euro,” maintains British MEP Richard Ashworth.
Politicians in richer states and their voters refuse to foot the bill.
“I don’t think I have ever met anybody in the UK and my constituency, London, who actually wants to contribute to the bailout of countries like Greece and Italy and to contribute to the continued existence of the euro, because I think it is a stupid idea to start with – it is just chucking money down the drain,” that is according to Gerard Batten, a British MEP from the UK Independence Party.
Yet pulling the plug on those states could trigger a chain reaction. Greece, investors believe, can no longer avoid quitting the euro. That in turn will spark the exit of Ireland, Portugal, even Italy and Spain.
“Greece, Ireland and Portugal – everybody said ok, the buck would stop there. In the last couple of weeks, spreads for Spain over Germany, spreads for Italy over Germany have gone up,” said Philippe Gijsels from BNP Paribas Global Markets.
Europe’s top banks hold billions of euros in Greek and Portuguese debt. If those countries go bust, they could lose that money.
“We might see scenarios like a bank run. That means people will run to the bank in order to withdraw their deposits, because they believe the bank may not be able to pay them,” added Marco Becht from Center for Economic Policy Research.
The euro’s facing an “existential crisis”, admits German Chancellor Angela Merkel. But the head of Europe’s biggest economy warns they still might not find a compromise at the Brussels summit. That is raising tension across the globe.
“There are problems in three time zones at the moment. The most visible, the most obvious, is clearly the eurozone problems. But on the other side of the Atlantic you have the US economy, not at the recession, but showing some very weak economic figures and suffering as well,” said Philippe Gijsels from BNP Paribas Global Markets.
EU leaders could sign the death warrant for the single currency at Thursday’s summit in Brussels. If again they fail to do a deal and halt the spreading euro virus, experts fear that public panic would take over denying them control.
We are a lot poorer now than we thought we were in 2007 – analyst
EU leaders gathered in Brussels are said to be considering a new bank tax to payroll Athens and stave off a looming default. Still, David Dodwell, a Trade Policy consultant, does not believe that the EU or the US has yet really begun to get to grips with the very grave collapse, which occurred in 2008.
“Of course, both European and US economies will get through it, but I think we all will have to recognize in the process that we are a lot poorer than we thought we were in 2007,” added the former Financial Times correspondent.
China could consider buying some of EU sovereign debt, but Beijing’s major concern now is the crisis in the US, Dodwell told RT.
“China is in a difficult position here. Its main concerns are with the plight of the US economy and the danger of default on the US treasuries. It holds approximately two-thirds of reserves in US dollars, so its greatest anxiety sits with the US. But they have to be concerned if one trillion dollars of debt sits with Europe and things can go pear-shaped in Europe. Then they stand to lose a great deal,” said David Dodwell, who is now Hong-Kong based.
The former correspondent hopes the Thursday meeting of EU leaders will bring some very concrete and measurable solutions since “the euro as a phenomenon is in quite serious danger.”