The Eurozone Financial Crisis Is Set To Deepen: Greek Government To Run Out Of Money by November 16, Italy is facing a “vicious circle” of weak growth and lack of confidence, UK Could Face A Referendum On EU, And Spain And Portugal Are Already Well Down The Greek Road
November 4th, 2012
New Turn in the Euro Zone Financial Crisis
The eurozone financial crisis is set to deepen following this week’s release of debt projections for the Greek economy. Budget estimates show that instead of peaking at 167 percent of gross domestic product, as predicted last March when the so-called bailout package was put in place, the debt ratio will hit 189 percent this year, rising to 192 percent in 2014—well above the worst case scenarios of just eight months ago.
With the Greek government expected to effectively run out of money by November 16, the eurozone crisis is certain to be a major issue at the G-20 finance ministers’ meeting beginning in Mexico City on Sunday. The German government’s refusal to make available any more money means that threat of a Greek default and a full-blown financial breakdown is back on the agenda.
The latest figures establish that the austerity program of the “troika”—the European Union, the European Central Bank and the International Monetary Fund—has created an economic catastrophe, the like of which has not been seen since the Great Depression of the 1930s.
The Greek catastrophe is only the sharpest expression of a crisis that is spreading through the eurozone.
Last week, Bank of Italy governor Ignazio Visco warned that his country faced a “vicious circle” of weak growth and lack of confidence. He was speaking after new figures showed that unemployment had reached its highest level in 13 years. The unemployment rate for young people is now 35 percent as factories shut down, firms go bankrupt and government spending is cut back as a result of the unelected Monti government’s austerity program.
Spain and Portugal, both under austerity programs, are already well down the Greek road. The Spanish banking crisis is further away from a resolution following Germany’s insistence that money from European bailout funds cannot be used to cover past debts but only to facilitate new loans. This means that last June’s commitment by eurozone ministers to end the situation where national governments are responsible for the debts incurred by their banks is a dead letter.