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Tuesday, May 15, 2012

The Eurozone Clusterfuck

Another day in the painfully slow demise of the Eurozone, and another round of depressing economic news.

Whilst the headlines boldly claim that the Eurozone has avoided recession by achieving zero growth (as opposed to a contraction), they ignore the fact that the Greek economy contracted by 6.2% in the first quarter of 2012 (according to the Hellenic Statistical Authority).

Five years of austerity have led to a 17% contraction of the Greek economy.

The "powerhouse" of the Eurozone is the German economy which managed to grow by 0.5%, thus pulling the rest of the Eurozone up by its boot straps. However, this merely highlights the sharp economic divide between members of the Eurozone. This economic divide is not sustainable in the long run, and something has to give.

Although Greece will repay fully a Euro450M bond that matures today (after failing to reach a deal with holdout investors), the Greek people and politicians are in no mood to continue with the terms of the bailout as they now stand.

Either the Eurozone renegotiates the bailout (which Germany will not do), or Greece will leave the Eurozone.

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