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How will Europe cope with Greece's problems?

2015年02月09日15:49  来源:人民网-美国频道  手机看新闻

Greece’s problem epitomizes the wider problems Europe is facing. If the Greek debt is written off, other indebted countries may follow its example. But if it is not, Greece will default. Europe is weighing the pros and cons of bad decisions that will lead to unpredictable results. That the radical left Syriza bloc has won the Greek national election has caused a ripple effect in Spain. On Jan 31, Spain’s fledgling radical leftist party Podemos (We Can) launched a demonstration in Madrid in which tens of thousands of people participated. The response of the troika (the ECB, EU and IMF) is the key.

Whether to write off the debt is the first question to be answered by the euro zone. The new Greek government has pledged to voters to write off the debt. On Jan. 30, Greek finance minister Yanis Varoufakis ruled out any talks with troika of further lending and committed to reject any extension to the country’s bailout.

This is an obvious indication of default, which has been welcomed by Greek voters who are fed up with the economics of austerity. But the German government has given a thumbs-down to default. On Jan. 31, German Chancellor Angela Merkel underlined her refusal to cancel any of Greece's debt, saying banks and creditors have already made substantial write-offs.

It will not necessarily be a good thing for Greece to exit the euro zone. If the country stops using the euro and starts to use a weak drachma - a possible solution for its predicament - it will go through hardships—a bank run, for example, or the risk of social conflict. Furthermore, Greece’s exit would force the international market to revalue the weak economies in the euro zone.

Gideon Rachman, columnist of the Financial Times comments: “Unfortunately, an explicit Greek debt write-off would cause more problems in Europe than it solved. Three main negative effects could be expected. First, it would cause a political backlash in northern Europe, which would strengthen far-right and nationalist parties. Second, far-left and anti-capitalist parties would gain credibility in southern Europe and would press for similar debt writedowns, as well as much expanded social spending — something that would lead to a collapse in market confidence. Third, the breakdown in trust between members of the EU that would follow a Greek default — even a negotiated default — would make it much harder to keep the EU together.”

Some observers point out that the Greek finance minister will need a sophisticated diplomatic strategy if he wants to work with the troika without infuriating Greek voters. Others believe there is still something that can be done about the huge Greek debt. A cut in the debt or an extension on the interest owed would reduce the burden on Greece.

This article was edited and translated from 《欧洲人咋解希腊式难题?》, source: People's Daily Overseas Edition, Author:Yang Ziyan

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(责编:张茜、燕勐)

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