Welcome   |   Login   |   Sign Up   |

GREECE/ Is it all hanging on a yes or no?

NYU Professor and US Federal Trade Commission consultant Nicholas Economides comments on the Eurozone crisis, the possible referendum in Greece, and what the EU must do to survive.

George Papandreou   (photo ANSA) George Papandreou (photo ANSA)

“Greece may have to do a hard default…and the European Union has to put enough money in the EFSF to be able to rescue both Italy and Spain if necessary…The best solution is to multiply the size of the EFSF to reach 5 trillion Euros”. Interviewed by ilsussidiario.net, Nicholas Economides, Economics Professor at New York University and consultant for the US Federal Trade Commission, underlines that “the leaders of the EU have pretended that the crisis is much smaller than it is”, and even if Greece does not go forward with the referendum, this does not make the need for drastic measures by the EU less urgent. 

If the majority of Greeks choose to vote no in the referendum, will the Eurozone be dissolved?
No, but Greece may have to do a hard default. There will be tremendous pressure on Italy and Spain. The European Union has to put enough money in the EFSF to be able to rescue both Italy and Spain if necessary. EU leaders have pretended that the crisis is much smaller than it is, and "kicked the can further" expecting the crisis to end by itself. The policies of a small EFSF and not ordering the ECB to fully intervene are catastrophic for the Euro and need to be reversed immediately! If the EU waits for a Greek default before taking these measures, it will be hard to save the Euro.

Do you think the situation in Greece is worse than the Athens government stated? How much worse?
Yes. The Greek government has been reluctant to uphold the law. Small groups of people (100 persons) have, in recent weeks, "occupied" various ministries, preventing people from working. Repeated strikes of various key sectors, including public transportation and ambulances, are so common that the list of "today's strikes" is the most important newspaper column. Even worse, the Greek government/police has been unable or unwilling to arrest the few thousand hooded "anarchists" who create extensive damage at every demonstration. To a large extent, the government is responsible for the descent of Greece towards chaos.

For Obama, the Eurozone crisis takes precedence at G20, but the public debt of Europe is lower than the American public debt. Is the epicenter of the global financial crisis in Europe or elsewhere?
The epicenter of the crisis is in Europe. The problem is that the EU institutions have not matured enough to deal with a big crisis. That may have been compensated if there were brilliant politicians. Unfortunately, there is not even a single EU politician today of the stature of the European leaders that created the EU. The way things are going, the USA will be the "lender of last resort," covering the debts that the EU will not. Like it did in 2008, the USA will be asked to lend money to EU banks. This will be a de facto failure of the Eurozone to act responsibly.

What kind of measures should be taken at the G20 to respond to the financial crisis?