Europe’s euro crisis continued in April 2010 as euro zone countries agreed to bail out the indebted Greek economy.
The “will-they, won’t they?” uncertainty came to an end as European leaders in Germany and France decided that the Greeks would receive 30 billion euros (41 billion dollars) to help pay their massive debts.
European countries will each chip in millions to help their Greek neighbours’ failing economy. German leaders made great play of the fact that they weren’t inclined to help Greece because German voters were unwilling to subsidise what they saw as Greek profligacy. Germany, however, wields decisive economic and political power in Europe and the loan was sanctioned by political leaders in Berlin. All the euro countries will help bail out the Greeks. Even Britain, struggling with recession, debt and unemployment – and not even a member of the european currency – will loan the Greeks hundreds of millions of pounds sterling, converting them to 735 million euros (1000 million dollars) as they cross the English Channel.
The billionaire currency speculator, George Soros, had both advised and predicted that eurozone countries would make the massive loan to Greece. He warned that without a rescue loan for the Greeks the euro would simply fall apart as a currency since Greece would have no option other than to default on its 30 billion euro debt.
The huge eurozone loan to Greece will make money available to the Greeks at 5%, a better rate than they can command on the international markets. And Greece certainly needs money to service its debts. In May 2010 the Greek government required to pay 11 billion euros just to avoid defaulting on its debt. Paying it off is going to be a long hard struggle.
As well as shoring up the Greek economy and thus the euro, European leaders must now inevitably address the future stability of the euro currency. With no central political control over euro zone member countries, individual national governments can tax and spend as they choose. Which is exactly what got Greece, along with Ireland, Spain and Portugal, into unmanageable debt. As long as that political situation continues, the more stable economies of Europe, such as the German economy, will risk being called on to rescue high-spending but weak partner countries.
It’s looking as though the way forward for the euro is likely to be increasing, and increasingly centralized, political control of European countries. In practice that means Germany taking more control of Europe, exercising more political control from Berlin. Funny how history can repeat itself, with variations on a theme.