Inquiring minds are again upon Europe and the still emerging financial problems throughout the European Union. The European PIIGS are not going away…point in fact, they are getting worse:
Unfortunately, however, the debt crisis in the eurozone is no longer a normal case, as Pröll knows all too well. Based on the latest updates to his deficit figures, Greek debt now comes to nearly 130% of its GDP. By 2015 Greece will have to repay debts of €140 billion, plus €90 billion in interest. And all that against the backdrop of a shrinking economy. One needn’t be a prophet to predict that this probably won’t work.
And this isn’t the only looming bankruptcy on the eurozone’s horizon. Ireland is also teetering on the brink. In the wake of its bank bailouts, the country’s debt ratio is due to soar to 150% of GDP by 2016. The markets are rating Irish bonds on a par with those of Pakistan and Venezuela. Irish economists are reckoning with default, with or without a bailout. Under these premises, policymakers can’t do much for now but buy time, so Pröll’s act is not unreasonable.
How it all plays out is anyone’s guess, but most realize it is going to be a very turbulent ride.
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