Is The Euro Going To Unravel?

[charles brough]

At this moment, the EU is working to get funds to Greece before the government runs out of money. Presumably, the EU will get the Greek government to raise taxes enough and fire enough workers to enable the EU & IMF to hand over more funds.

 

But will Greece run out again soon? Perhaps before the end of the year? Then, is Europe to come up with strill more borrowing to give them more funds---to, in other words, throw good money after bad?

 

Obviously Greece was profligate and is now paying the price, but do we know how big a price? They are really suffering.

 

And there is the core of the problem: The more people laid off and the more taxes imposed, the worse the economy becomes and, hence, the lower the tax take. In other words, the situation cannot improve under such a program. The harsher the "solution." the less the government can keep up with its obligations. And the more it struggles, the less confidence the banks have in its ability to recover and pay back what is loaned to it. That means that interest rates rise on the funds Greece has to borrow. That, also, makes it harder to pay the funds back.

 

In other words, it is in a vicious cycle and, unlike us, it cannot borrow its way out.