Thursday, June 11, 2015

Issue of Greece and eurozone

I had stopped watching world news temporarily. As far as reading newest articles, the financial status of Greece in the eurozone remains unstable.

In Greece, leftest Syriza party won in the last general election. Alexis Tsipras, the leader of Syriza, declared the end of austerity and began to negotiate with EU to prolong the rescue program without enhanced budget reduction.

My past entry: Anti-austerity won the election in Greece

However, the conflict between Greece and the troika of creditors, the European commission, the International Monetary Fund and the European Central Bank, got deteriorated.

My past entry: Greek financial crisis

The market responded with a pessimistic forecast. Greek bond is now deemed as junk.

My past entry: Greek bonds into junk, S&P says

Nonetheless, Tsipras remains bullish. He suggested the exit of Greece from eurozone again and again. According to him, withdrawal of Greece can be a trigger for the collapse of the eurozone itself.

The Guardian: Greek exit would trigger eurozone collapse, says Alexis Tsipras

The intimidation of Tsipras looks ridiculous at a glance. However, Greece would be the first example of the secession from the eurozone, if realized. Its influence on the stability of Euro is incalculable. There are some countries in which withdrawal from EU or eurozone was discussed, such as Spain and the UK. They can make a decision referring the course of Greece.

I do not believe that Greece wants to drop out from eurozone seriously. If Greece stops using Euro, its domestic currency will plunge into falling immediately. Tsipras stands in a difficult situation between the demand for austerity from EU and domestic pressure. I prospect that he will finally have to obey the request of international authorities. Debt is debt, not an illusion.


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