With a debt burden 160% of its GDP, Greece formally agreed three months ago to the EU’s austere plan of severe spending cuts and financial reform in exchange for a financial bailout. But, the majority of Greeks refused to accept the notion of responsible debt spending and voted in defiance of the financial treaty. The result for Greece, now, is a government in chaos and an economy on the verge of collapse. Today, Germany’s Chancellor, Angela Merkel, delivered an ultimatum to the Greeks; comply with the agreement or be severed from the euro.
via Drudge, The Telegraph reports,
Greece may be forced to leave the euro if the country refuses to implement spending cuts agreed with the European Union, Angela Merkel warned.
Raising the spectre of a Greek exit, the German chancellor said “solidarity for the euro” was threatened by the ongoing political crisis in Athens. …
The cost of Spanish government borrowing also hit a record high since the single currency was introduced because of concerns that the crisis will spread. …
Attempts to form a new government in Athens have been thwarted for the past nine days, although the country’s president will meet all major parties this afternoon to discuss the forming of a “technocratic” administration rather than a coalition.
An outgoing Greek minister warned that the country could descend into “civil war” amid the chaos of a euro exit. “If Greece cannot meet its obligations and serve its debt the pain will be great,” Michalis Chrysohoidis was quoted as telling a local radio station. “What will prevail are armed gangs with Kalashnikovs and which one has the greatest number of Kalashnikovs will count … we will end up in civil war.”
New elections may be held next month and Greek voters are likely to be warned by European leaders that their country may be ejected from the euro if they do not support parties backing austerity measures.
Germany and the European Central Bank are thought to have drawn up detailed plans for a Greek exit for the euro. They are designed to stop it provoking panic in other vulnerable countries, particularly Spain and Ireland. However, this is fraught with difficulties, particularly if Greece refuses to take part in a “negotiated exit”.
Greek Minister Chrysohoidis warns that a separation from the euro may likely lead Greece into a civil war, and the ones with more weapons will win.
This is the hideous creature that is formed when irrational spending and catastrophic debt are allowed to spiral unrestrained. Just wait…Illinois and California are putting the finishing touches on their monsters.
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