Daily View: What now for the eurozone?
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that Greece needs Germany's support, because negative German public opinion could destroy the euro:
"German and European leaders have responded to this downward spiral only with demands for fresh austerity. Greece obliged once again last weekend, with more tightening. But we must now understand Greece is at the precipice of social instability. Further cuts will push it over the edge - ending the adjustment programme, and intensifying the financial squeeze and the drumbeat of those trying to push Greece out of the eurozone. It is utterly naive to believe that the downward spiral would stop there. Italy, Spain, Portugal, Ireland, and even France could quite possibly be next, with the risk of bank runs pulling the entire edifice of monetary co-operation into rubble."
that the conference call between Greece, France and Germany which preceded this confirmation of German and French support didn't solve anything in the long term:
"Angela Merkel and Nicolas Sarkozy announced no new measures to alleviate the sovereign debt crisis; rather, they merely declared "solidarity" with Greece and assured the markets that Greece would not be forced from the single currency.
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"Their words seem to have assuaged the markets for the moment, but only the most brazen optimist would bet on the rally being long lived. Tests of confidence will come later today when troubled Spain holds a debt auction and the EU's interim economic forecasts are expected to be downgraded."
But it is inevitable Greece will default on its debts, much to the irritation of the "eurozone paymaster" Germany:
"The original understanding, reached at the beginning of the debt crisis, that Germany, along with its partner countries, would help Greece re-structure its economy so that it could grow again and repay its debts and thus preserve the eurozone, has frayed to breaking point. Greece cannot recover and Germany's patience is running out. The impossibility of avoiding a Greek default must be acknowledged shortly."
extra Greek austerity measures will only make matters worse, with the Greek exit from the eurozone more likely. The only question is who will push them:
"The trigger could be political; governments in northern Europe face electoral defeat if they support further bailouts. Many ruling German politicians are firmly against paying for rescue packages and a shared approach to sovereign debt. Philipp Rösler, the German Economics Minister, raised the possibility this week of an "orderly default" for Greece. But the pressure is not just coming from Germany: Jan Kees de Jager, the Dutch Finance Minister, referred last week to the 'ultimate sanction' of expelling Greece from the eurozone."
Finally, that Germany, not Greece, should leave the eurozone:
"Disorderly break-up involving the forced exit of weaker members, though perhaps now inevitable, certainly offers no economic panacea. So what would work? If Germany has become more the problem than the solution, then perhaps the departure of Germany itself is the least disruptive answer.
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"Last week's resignation of Jurgen Stark, holder of the Bundesbank flame on the European Central Bank board, in protest at ECB support for the European periphery, demonstrates that Germany is at the end of its patience. The euro hasn't worked, and until a United States of Europe is formed, is most unlikely to. Time to face up to the truth."
