PIIGS is a new acronym for Portugal, Ireland, Italy, Greece and Spain, which are euro zone members with big budget deficits and other economic problems, that led to market speculation against the euro. Greece has the biggest economic woes and is at the center of attention, but the market speculation could spread.
The Telegraph accused European leaders of “sparking unease and confusion” on Thursday. The heads of state from the euro zone had pledged “determined and coordinated action” to prevent Greece’s full-blown economic collapse, but did not provide a more concrete plan. Thus initial reaction from the financial markets was negative: Greece’s borrowing costs spiked even further and the euro slid on foreign exchanges, losing nearly 2 cents against the dollar, its lowest level for the last nine months.
According to the New York Times French officials suggested that Greece could be Europe’s Lehman Brothers: “undeserving of help, a potential catalyst for moral hazard elsewhere but simply too critical a link in the chain to be allowed to fail.”
EU Economic and Monetary Affairs Commissioner Joaquin Almunia said that there is a “serious risk” that Greece’s budget problems will make it harder for other EU countries to keep financing their own deficits (M&C). France had been concerned about contagion and pushed for a “firewall” to protect the rest of the euro zone, but Germany strongly opposed any such moves.
Deutsche Welle concludes from a press roundup: “German newspapers reacted cautiously to the EU’s political solidarity with Greece, wary of the potential cost to German taxpayers a bailout could bring. Other papers say inaction carries a far greater risk.”
What do you consider the greater risk here? Bailout or inaction?
Do we need a “firewall” to protect the rest of the euro zone from contagion as French President Sarkozy suggested?
More powers to the European Council? Its new president, Herman Van Rompuy, is using the financial crisis “to launch an audacious grab for power over national budgets,” claims the Independent and cites leaked EU documents.
More powers to Germany? Reuters has learned: “EU diplomats say that in any bailout euro zone states would likely contribute voluntarily based on their economic weight. Europe’s biggest economy would thus become its lender of last resort, setting a precedent that few Germans will relish, even if Berlin gains greater sway over its partners’ budget policies.”
Is the United States to blame for the euro zone’s trouble? A Romanian journalist goes soooo far as to claim on Europe’s World: “By allowing NY financial traders to viciously attack struggling EU members, the US is putting the transatlantic partnership in jeopardy”
Please share your views in the comment section here or over at Atlantic Community, where I wrote this first.
Copyright 2010 The Moderate Voice