The problems of the Eurozone are
deepening with each passing second. With Athens being unable to form
a new governmental structure the whole of EU is on a standstill.
While the Greek aren't able to decide their leaders the EU doesn't
have an authority to talk to. It's a very primitive but important
concept. A leader is chosen to represent one group of people in a
community where they want to be represented. Here they would need a
government and their head would represent himself in front of the EU
and discuss the fate of Greece. Right now as Greece doesn't have a
leader, the EU cannot do anything substantial because whosoever comes
into power will have a certain basic set of ideas. These ideas will
be either pro-bailout and austerity (highly unlikely) or against
austerity that cannot be determined.
Right now one thing that Greece has shown a positive surety on is its will to stay with the European Union. According to some polls 75% of the Greeks want to stay with the the European Union but the basic point is that they don't have a leader who can represent them in the forum and settle the finances. If this continues and the next elections are held in June then a leader needs to come out clearly enough to match up to the requirements of the crisis and contain it. The question till that time is- 'How will Greece sustain till that time without funds?'. While the external funds are cut off it is going to be very difficult for the Greeks to sustain and if 'Grexit' (Greece+Exit) happens then the fall in the value of Euro is an undeniable truth.
Right now one thing that Greece has shown a positive surety on is its will to stay with the European Union. According to some polls 75% of the Greeks want to stay with the the European Union but the basic point is that they don't have a leader who can represent them in the forum and settle the finances. If this continues and the next elections are held in June then a leader needs to come out clearly enough to match up to the requirements of the crisis and contain it. The question till that time is- 'How will Greece sustain till that time without funds?'. While the external funds are cut off it is going to be very difficult for the Greeks to sustain and if 'Grexit' (Greece+Exit) happens then the fall in the value of Euro is an undeniable truth.
A solution(temporary) that the Greek's
might come up will have to be issuing of IOU's. IOU's are actually a
note which acknowledges the fact that- 'I Owe U' the same way as the
government of California did in 2009 when it underwent a severe
financial crunch. The basic difference between a cheque and an IOU
would be that it is much more informal, although it might have
watermarks and seals but it won't have a specific date of repayment
and it is not necessary that it is to be exchanged for a currency. In
certain cases it might be used as a means of exchange to get certain
goods as well.
The problem with this is that firstly
if Greece issues such a 'promissory note' acknowledging its so called
debt, which currency will it correspond to? Although I do understand
that I have myself said that it is not necessary that it is exchanged
for a currency but even if the Greeks 'acknowledge' that they owe some money to
someone, then they would still have to mention a currency to which they will correspond and finalise the repayment. It worked for California because no matter what would have happened, at the end of the day the account would have been settled in terms of USD but the same doesn't stand for Greece. The second is
that with the rumors about 'Grexit' (or being thrown out of the EU)
are still afloat. Hence the investors wouldn't know which currency
would they get their returns in if they accept the 'promissory
notes'. If a scenario comes up where Greece is out of the EU then
Drachmas will be followed and the depreciation which would occur to
it after it is relaunched is unimaginable.
The investors are very unsure of what
to bet on and what to bet against. With 'Mr. Normal' stuck in
lightning while going to Germany, Greece's political turmoil and
'Grexit' on cards. What is going to happen to the European Union? Is
it the end of Super-Bloc? Or will something magical happen and save
this Greek EU relation-ship from sinking?
Photo: A replica of one drachma.
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