Sunday, 25 January 2015

How Greek Default May Still Unravel the EU

By Frank Hollenbeck

Greece is back in the headlines. This should surprise no one. It was naïve to think that Greeks would accept being debt slaves forever.

Despite all the rumblings that Greece will be forced to leave the Euro, there is in reality no mechanism by which EU countries can force a Eurozone member to exit the currency union. It really is all a bluff. This is a standard scare tactic used by governments to induce people to give up freedom for a little security.

Greece currently owes a little over 300 billion euros to various creditors. About 200 billion is owed to the Eurozone institutions, the European Financial Stability Facility (EFSF), and the European Stability Mechanism (ESM), that raised funds based on Eurozone guarantees. The remainder is owed to the IMF, ECB, and private creditors. If Greece were to default, it would probably be mostly on the debts owed to Eurozone members. To get Greece down to a manageable debt level, a default of at least 150 billion euros is necessary.

Read the rest here.