The severe economic crisis that has afflicted Greece has sent ripples of disquiet in the Eurozone and created doubts about the sustainability of the fragile recovery in the entire continent. The problems in Greece are themselves painful but there is the worrisome prospect of more economies cracking up. Greece faces a budget deficit of about 13 per cent of its GDP against a norm of 3 per cent in the Eurozone and owes billions of dollars to international creditors, mainly German banks. Other countries like Spain, Portugal and Ireland are also in crisis. Spain is a major EU country with a large economy which too has a public deficit of over 11 per cent of the GDP and has a high unemployment rate of about 20 per cent.
Though fellow European Union countries have been sympathetic, nobody is willing to bail out Greece from its troubles. Germany is the strongest economic power but the German banks are reluctant to put more money in a sinking Greek economy. The popular opinion in Germany is strongly against any bailout and Chancellor Angela Merkel has taken a tough stance. Greek prime minister, George Papandreau, is on a tour of Europe and the US, soliciting assistance, but got advice that Greece should deal with its crisis by imposing a severe austerity programme. Greece has implemented such a plan, which is not found to be good enough.
There is even a proposal that countries like Greece and Spain should split from the Eurozone and reintroduce their national currencies as a way out of the situation. But this is considered a remedy worse than the disease. It will also put question marks on the sustainability of the European Union. During the formation of the EU it was thought that political integration was more difficult, but a seamless economy and common currency would give it a boost.
However uneven economic strengths and divergent ways of economic management have now proved to be equally threatening. Ultimately it will be difficult for the EU to escape responsibility and may have to go to the aid of Greece with stringent credit conditionalities. Allowing some member countries to go down will in the long run weaken the Union both economically and politically.
