Can the Euro Survive

The financial crisis in Europe seems to be getting worse every week. Most of the European countries have a debt-ridden economy and it is simply unsustainable unless the leaders in Europe take some concrete measures to lessen the debt and increase jobs.

The big mess

Some of the countries of Europe such as Spain and Italy have huge amounts of debt. Greece is practically drowning in debt. It is simply impossible to get rid of this debt unless drastic structural changes are made in the economies of these countries. Austerity alone will not do the job. In fact, too much austerity will make growth impossible and without growth, there is no way out of this mess. Greece is in perpetual debt and it will remain in debt unless huge growth takes place. That appears impossible in the near future. Greece is in a vicious cycle from which there is no escape. In fact, some economists argue that leaving the Euro and returning to the Drachma is the only viable option for Greece.

Severe austerity has brought the Greeks to their knees. The entire nation seems to be on tender hooks. Things could explode any time. The debt of Greece is several times its GDP and it would take many years before some sort of growth is seen.

There is a limit to austerity and a limit to how much Germany can help. The chancellor of Germany has recently made a statement that Greece simply has to abide by its agreement or Germany would not be in a position to help financially. If Greece wants continuous financial help from the European Stability Mechanism Fund, it simply has to go in for more austerity measures and that is just not going to go down well with the grief stricken people of Greece. These austerity measures are very painful for the people.

It keeps getting worse

Spain is on the brink of a full-scale bailout. It is just a matter of time before it finally capitulates. The Spanish 10-year bond yields are beginning to creep up to the dangerous 7% levels once again. Italy is doing no better. Italian bond yields are hovering close to 6%. Even Cyprus asked for a bailout.

The need of the hour for Europe

Europe is in desperate need of financial help. Something has to be done very quickly or the Euro zone could disintegrate quickly. European leaders are simply not doing enough. Mario Draghi cannot work his magic every time by saying, “We will do whatever it takes to save the Euro. And believe me it will be enough”. The markets reacted well but this cannot go on forever. It is decision time for the leaders of the Euro zone and they better do something quickly. Time is running out.