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What’s Going on With the Europe’s Finanical Crisis? Here’s What You Need to Know

What’s Going On In The Eurozone? Here’s What You Need to KnowThings are unraveling in the eurozone again. Last week, there was a collective sigh of relief after the last-minute vote by EU members to deal with the Greek debt crisis. In fact, even the markets responded well to the news.

But all that was undone Monday when Greek Prime Minister George Papandreou decided to call an “unexpected” referendum vote on the EU bailout deal that would rescue Greece.

“The people will be asked whether they want to adopt [the deal] or reject [the deal]. This vote of confidence will be a foundation stone on which we will build a new structure, a new Greece,” the Prime Minster recently said according to a Guardian article.

It is rumored that the referendum vote will be held in January.

The people of Greece may actually vote down the bailout. According to the latest opinion poll, a majority of Greeks dislike the deal. Experts believe that the bailout deal is unpopular because, per the terms of the bailout agreement, Greece would have to make severe state spending cuts including salaries for protected state jobs, pensions, benefits, etc.

The Germans are infuriated with the Greeks, the Finns are hinting at expelling them, weeks of negotiations have come undone, and markets around the world have taken a hit.

Business Insider quotes a Greek trader who says this new proposal is bound to unseat Greece’s government. He writes:

I believe the present government will be history by the end of this week. Most probably this evening actually, when the already scheduled emergency cabinet meeting is to be held.

The important question to be resolved is whether the present government will be replaced by an interim national unity government for several months ratifying in parliament the Eurogroup decisions of last week and then proceeding with elections, or else whether national elections will be immediately announced with probable dates the 4th or 11th of December.

And that’s just one reaction to Papandreou’s call for a referendum vote.

Since making his shock announcement, several Greek lawmakers have defected and are calling for the Prime Minster’s resignation. Among those who have opted to defect because of the Prime Minster’s seemingly ill-advised referendum vote are members of his own socialist Pasok party.

“If it continues with Papandreou and the referendum, we will end up with a default and the default will push us into the drachma,” former Greek Finance Minister Stefanos Manos said in an interview with Dublin-based broadcaster RTE today.

The head of parliament’s economic affairs committee Vasso Papandreou (who is not related to the prime minister) called for an early ballot and a temporary unity government to “safeguard” the EU deal agreed last week to slash Greece’s huge debt by nearly a third, reports News24.

Should the referendum result in a rejection of the EU-IMF aid plan, it “would increase the risk of a forced and disorderly sovereign default” and raises the chance of Greece leaving the euro, Fitch Ratings said in a statement today.

“The crisis in the country has taken on uncontrollable dimensions and threatens the cohesion of Greek society,” said lawmaker Milena Apostolaki, who said she will defect from Pasok.

“The titanic effort needed to exit the crisis needs national acceptance and social support. A referendum is a deeply divisive process. I want to express my categorical disagreement with this initiative of the government,” Apostolaki added.

“Papandreou’s government is something that defies logic: it ought to have fallen some time ago given the economic situation of Greece,” Niall Ferguson, a historian currently at Harvard University, said in a Bloomberg Television interview. “The reason it hasn’t is that the Greeks themselves aren’t sure if there’s a better alternative to this grim austerity.”

In response to this unexpected move, the Institute of International Finance (IIF) has tried to assure Greece of its commitment, on behalf of private banks and other institutions, to the October 27 agreement with European leaders to accept a 50 percent writedown on Greek government bonds, reports Wall St. Cheat Sheet.

“We will work closely with the Greek authorities, euro-area officials and other relevant parties to agree on, finalize and move toward implementation of the details of the voluntary private-sector involvement in support of Greece’s reform effort to recover from the current crisis, restore market access and lay the basis for renewed growth,” said the IIF in an e-mailed statement today.

However, the IIF had a much gentler way of expressing its reaction to the Greek news than, say, the Germans.

“You can’t help thinking that they should be grateful as Europe is trying to help,” said Konstanze Pilge, a 26-year old student, in a recent Reuters report. “Now it looks like they are going to mess things up.”

“It just goes to show once again what a huge mistake it was not to throw Greece out of the eurozone at the start,” said Wolfgang Gerke, a banking professor and president of the Bavarian Financial Centre think tank, in the same report.

Germany might be more annoyed than anyone else because they are regarded as the “paymaster” of the eurozone and the other 16 EU countries look to them as a financial savior.

Rainer Bruederle, parliamentary leader for Free Democrats (FDP) who share power with Chancellor Angela Merkel’s conservatives, suggested Athens was trying to wriggle out of the €130 billion bailout deal, which demands harsh state spending cuts from Greece in exchange for aid, reports Reuters.

“I was irritated (by the news),” Bruederle told Deutschlandfunk radio. “That’s a strange way to act.”

Countries like Germany may find it difficult to defend funneling more cash to Athens over the coming months with the threat of the referendum looming, reports Reuters

“If the Greeks say no, then it means bankruptcy. It would be a clear ‘no’ to the euro,” said Josef Kaesmeier, chief economist at Munich-based private bank Merck Finck. “We have got to the point where we can say: if someone doesn’t want to be in the club any more, they should go.”

The Finns are also unhappy.

“The situation is so tight that basically it would be a vote over their euro membership,” Alexander Stubb, the Finnish minister of European affairs and foreign trade, said in an interview with Finnish broadcaster MTV3.

“Greece has committed to a new program which includes structural reforms. All of a sudden, if they vote against those reforms, then Greece is the one who violated the agreement,” he said.

He added no bailout aid would be deployed if Greece dodged from the required reforms, a prerequisite that must be agreed on before the EU commits the kind of money necessary to relieve them of their financial fiasco.

And how did the markets react to Papandreou’s unexpected referendum call? According to the Telegraph:

London’s FTSE 100 index of leading shares dropped more that 2pc, with markets in Germany falling, France, Spain and Italy sliding between 2.7pc and 4pc.

Japan’s Nikkei 225 dropped 1.7pc to 8,835.52, Hong Kong’s Hang Seng lost 2.5pc, and Australia’s S&P/ASX 200 shed 1.5pc, despite the country’s first rate cut – a quarter-point to 4.5pc – since 2009.

The Dow Jones fell 2.3pc to close at 11,955.01. The S&P 500 fell 2.5pc to 1,253.30, and the Nasdaq composite fell 1.9pc to 2,684.41.

As mentioned above, the EU is unraveling and it’s not certain where things are headed. But wherever they are, it doesn’t look good.

Comments (47)

1 2
  • logical1
    Posted on November 1, 2011 at 7:39pm

    If history has taught us anything, its that the Germans are only going to take so much before they snap.

    Greece is playing with fire here. Merkel is only going to put up with so much before she demands that Greece be removed from the EU. They would be better for it.

    Imagine the hypocrisy of the Greeks. They expect they can vote to see if they need to comply with being given 100+ billion euros? Let them collapse.

    Report Post »  
    • A Doctors Labor Is Not My Right
      Posted on November 1, 2011 at 8:27pm

      Greece would be wise to reject the offer, and wise to flee the EU and the fiat money system. It‘s borrowing fiat money that got them into the mess they’re in (the same is true of us), and it will be a rejection of the fiat money system that will save their economy.

      Learn Austrian Economics, Greece (and America).

      See here.

      Smashing Myths and Restoring Sound Money | Thomas E. Woods, Jr.
      http://www.youtube.com/watch?v=HAzExlEsIKk

      And here.

      Why You’ve Never Heard of the Great Depression of 1920 | Thomas E. Woods, Jr.
      http ://www.youtube.com/watch?v=czcU*****mnsprQI
      (Remove the five asterisks in this URL. TheBlaze’s filter will not let me post it as a normal URL.)

      Report Post »  
    • Jaycen
      Posted on November 1, 2011 at 10:55pm

      Does anyone else think Harvard proffessors are fools?
      ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
      “But all that was undone Monday when Greek Prime Minister George Papandreou decided to call an “unexpected” referendum vote on the EU bailout deal that would rescue Greece.

      “The people will be asked whether they want to adopt [the deal] or reject [the deal]. This vote of confidence will be a foundation stone on which we will build a new structure, a new Greece,” the Prime Minster recently said according to a Guardian article.

      It is rumored that the referendum vote will be held in January.

      The people of Greece may actually vote down the bailout. According to the latest opinion poll, a majority of Greeks dislike the deal. Experts believe that the bailout deal is unpopular because, per the terms of the bailout agreement, Greece would have to make severe state spending cuts including salaries for protected state jobs, pensions, benefits, etc.”
      ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
      Papandreou’s government is something that defies logic: it ought to have fallen some time ago given the economic situation of Greece,” Niall Ferguson, a historian currently at Harvard University, said in a Bloomberg Television interview. “The reason it hasn’t is that the Greeks themselves aren’t sure if there’s a better alternative to this grim austerity.”
      ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

      Report Post » Jaycen  
    • Jaycen
      Posted on November 1, 2011 at 10:58pm

      How does George Papandreou’s administration defy logic? The Greeks are primarily a huge mob of lazy union members. He’s suggesting they vote themselves more borrowed spending to maintain their easy life-styles.

      Just look at America for a parallel and tell me again how it defies logic? George Papandreou is a Greek Barack Obama.

      Report Post » Jaycen  
    • Ruler4You
      Posted on November 3, 2011 at 2:22pm

      The EU was designed to fail just the way it is failing right now. And Greece was the logical among the first to fail. Along with Ireland and Italy and Portugal. But others are just as close behind. It is imperative, in their minds, though, that this thing fail hard. And drive it full force into the ground is exactly what they intend to do.

      Report Post » Ruler4You  
    • Swalker
      Posted on November 3, 2011 at 7:53pm

      This sucks more and more

      and so does Lawrence O’donnell

      http://justrightofleft.blogspot.com/

      Report Post » Swalker  
  • heyjim55
    Posted on November 1, 2011 at 7:11pm

    The Greeks should default and get out of the EU, it will hurt everyone but the only way to get out of this as far as I am concerened is for them to default. They don’t belong there and are better off with their own currency.

    Report Post »  
  • Sicialian Eyeball
    Posted on November 1, 2011 at 7:10pm

    Just the coming attractions for what going to happen in America. Have plenty of ammo and get out of the cities.

    Report Post »  
  • Observer500
    Posted on November 1, 2011 at 6:57pm

    Hopefully America can learn from the financial problems of EU countries.

    If we don’t learn from it, we will have their problems as well.

    Report Post »  
  • FANGS
    Posted on November 1, 2011 at 6:03pm

    I can’t wait until the American left starts rioting. The 95% rest of our Country will open up on everything that even hints of Socialism. Massacre, Bloodbath,Going Postal, will be an every day event until all Socialism is destroyed. The best part is, They‘ve all exposed themselves so It’s not going to be difficult to pick a target. Everyone I’ve ever talked to, say’s that the leftist Union news media is their #1 target, #2 the unions, #3 all Democrats.

    Report Post »  
    • UrbanCombatSurvivor
      Posted on November 1, 2011 at 8:38pm

      This is a classic example of someone who feels the need to have support behind their own opinions in order for said person to feel those opinions have any weight, or any worth for consideration by others.

      No, everyone you’ve ever spoken to has NOT claimed to be ready for a revolution. Nor did any claim that during said revolution they would target “enemies” in your chosen order.

      Learn to present your stances as your own, no one takes anything else seriously.

      Report Post »  
  • kathleenlee
    Posted on November 1, 2011 at 5:51pm

    If this goes belly up, then buckle up Americans…cause we’re going down the tubes with Europe…What obuma wanted all along. I‘m so worried about this nation that I’m actually sick from it, in my heart. I’m a 100% disabled veteran and I can’t believe after all I gave that this man will sink this Republic with his communist friends. My America..our America…destroyed by this man. What a legacy for our children. That it just so happened that the first black man, with hope and change in his heart…looking forward to an open administration…didn’t do anything he promised..EXCEPT…fundamentally changing the country from a God blessed Republic, to a communist democracy. He should be arrested for treason, and executed…for what he has done. WHERE THE HELL IS THE FBI????? YOU USED TO BE HONORABLE…IF YOU WAKE UP AND DO YOUR JOB BEFORE WE TOTALLY FAIL..DON’T FORGET HOLDER!!!!

    Report Post » kathleenlee  
    • zen2nite
      Posted on November 1, 2011 at 7:02pm

      Impeach Obumer! NOW! If this was Bush we wouldn’t be blinking.

      Report Post »  
  • progressiveslayer
    Posted on November 1, 2011 at 5:37pm

    A Greek tragedy indeed,there’s a 100% chance Greece will fail,it has to it’s a socialist country and socialism always fails.Margret Thatcher said it best ‘The trouble with socialism is that eventually you run out of other people’s money’?

    It’ll happen here as well because people have been conditioned over time to believe government is the answer to all problems,people actually believe we have a constitutional right to a house a job and health care,it’s insanity and the only way it gets fixed is a total collapse of the system because D C WILL NOT cut spending.

    Report Post » progressiveslayer  
  • RightPolitically
    Posted on November 1, 2011 at 4:54pm

    Germany and the other stronger EU nations have finally come to realize what COMMUNitry and socialism really means: Those who try the hardest, work the hardest and achieve get to have most of it taken away from them by the FORCE OF THE STATE and given to the failures. And what will that and does that ALWAYS breed? More failures and dependency! Ya‘ll are gettin’ what you deserve Europe…..

    Report Post » RightPolitically  
  • AxelPhantom
    Posted on November 1, 2011 at 4:35pm

    So:
    1) The Greek parliament passes it and their people rip the place apart when the 50% of them that work for the gov. are asked to take huge pay-cuts/benefit cuts
    2) The Greek parliament rejects it and they go bankrupt taking the French, Spanish, English and Poruguese over exposed banks, currency, governments and financial institutions with them.
    3) The EU forces them out of the club and they go down taking the French, Spanish, English and Portuguese over exposed banks, financial institutions and governments with them

    None of the above look good.

    Report Post »  
  • investlite
    Posted on November 1, 2011 at 4:27pm

    All you need to know is that there is about a 5% chance of Europe surviving the decade. And a 0% chance that Greece survives. They‘ve leveraged against a future that they don’t have.

    If you haven’t read: After America get ready for Armageddon, you should. It explains exactly where they’re headed and why.

    Report Post »  
  • blazingaway
    Posted on November 1, 2011 at 4:10pm

    These people in the EU were idiots to form such a union in the first place … money and politics go together. How do they think they will preserve their sense of nationalism with a common currency?
    It will never work unless they find a political system that units them. Money never units, it divides.

    Report Post » blazingaway  
    • Lloyd Drako
      Posted on November 1, 2011 at 5:12pm

      You ask, “How do they think they will preserve their sense of nationalism with a common currency?”
      Americans have a common currency, yet Texans are proud of being Texans, Vermonters of being Vermonters, Montanans of being Montanans, and so on. If the EU survives, perhaps European nationalism will evolve into local/regional patriotism, which is not the same thing.

      Report Post » Lloyd Drako  
  • SerikFox
    Posted on November 1, 2011 at 4:08pm

    Personally, I think they should just disband the EU.

    Report Post »  
  • Agnes
    Posted on November 1, 2011 at 4:04pm

    Each and every European nation should be self-sufficient and not depend on anyone else for financial assistance. I know personally that many people do not work and receives all kinds of benefits at the government’s expense. No one works harder than the American working citizens.

    Report Post »  
  • Volsense
    Posted on November 1, 2011 at 3:57pm

    Great post, GINGERBREAD @ 3:45. We should follow the action that Iceland took. Flush all the liberal garbage and the republicans who allowed them to drive us to the verge of bankruptcy down the bowl of life. This has stopped being a democrat/republican atteck on the American people, it is an anti-American global cabal and its intentions to destroy our economy and our way of life. Time for Americans to stand up and tell the Obamas and Boehners to get out of the way and bring this nation back to the principles on which we were founded.

    Report Post »  
  • mike_trivisonno
    Posted on November 1, 2011 at 3:51pm

    Greece is perhaps the most important symbol of Western Civilization. The intellectual light ignited in Greece still illuminates our world.

    Our enemy must destroy it. The Light of Greece must be extinguished as it heralds the close of an Age.

    Greece must not fall.

    Report Post » mike_trivisonno  
    • guido.cavalcanti
      Posted on November 1, 2011 at 5:04pm

      I don’t think Greece is illuminating anything anymore.

      Report Post » guido.cavalcanti  
    • Lloyd Drako
      Posted on November 1, 2011 at 5:21pm

      “Greece must not fall.”

      OK, but what do you mean by “fall?” Does Greece fall if it withdraws or is expelled from the EU? If it stays within it, but under conditions of such austerity that authoritarian government is needed, despite the EU’s insistence that member states be democratic? If it simply defaults?

      I note your impassioned description of Greece as the fountainhead of the western intellectual and artistic tradition. In passing, though, you might recall how Europeans were enthralled by the heroism of Greece’s struggle for independence from the Ottomans in the 1820s. Various romantic types like Byron actually went there, only to be terribly disillusioned when they discovered that the latter-day Greeks were not at all like the heroes of Thermopylai!

      Report Post » Lloyd Drako  
  • Volsense
    Posted on November 1, 2011 at 3:48pm

    The Greek PM is doing what liberals do….destroy. He bankrupts his country and then tries to take the EU and the rest of the world down in ashes as he is determined to do to his own country. The EU has the Greeks and the US has its California. Just a matter of time until their way of life destroys everything around them like has happened countless times when liberals are in charge.

    Report Post »  
  • gingerbread
    Posted on November 1, 2011 at 3:45pm

    Well, let’s see. Does any one remember ICELAND. This is a small country that got themselves in the same trouble that Greece is now going through. The people in ICELAND, voted to bite the bullet. The refuse all “BAIL OUT” money, and decided to go back to living within their means. It took them about two years of tough going, but as of today, ICELAND is in the black and a hell of a lot stronger, financially. Oh they got rid of all their politicians that got them into this mess. Maybe the GREEKS have enough cojones to get out of this mess themselves. But I will advise them to get rid of all their politicians that caused all this mess. Let them start with politicians that have the people at heart, instead of the ones that are just CYAing.

    Report Post » gingerbread  
  • tkrock
    Posted on November 1, 2011 at 3:29pm

    Maybe we should start listening to Glenn and become more self reliant. I am going to invest in food by slowly building up a supply. I found this company out of Utah that has a network marketing strategy and sells gormet food with a 25yr shelf life. http://www.prosperity1.mygofoods.com/ . I made may first order and am alreardy feeling better.

    Report Post »  
    • planbdeveloper
      Posted on November 1, 2011 at 3:54pm

      Yea, I think GoFoods is Awesome too! By the way…are you investing in Gold as well?

      Report Post » planbdeveloper  
  • deerjerkydave
    Posted on November 1, 2011 at 3:22pm

    I once heard a prophecy that under socialism you eventually run out of other people’s money. I believe that came from Prime Minister Thatcher. It is now coming to pass. Why? Because socialism is a leach. It consumes more than it produces. Eventually the host runs dry and all of the accounting gimmicks in the books can’t hide it.

    Report Post » deerjerkydave  
  • GulfPeg
    Posted on November 1, 2011 at 3:17pm

    If the Greeks don’t take the bailout, let’s B O Y C O T T the Greek tourism industry. If it weren’t for the Americans, the Greeks wouldn’t have a tourism industry.

    Report Post »  
    • Justathinkin
      Posted on November 1, 2011 at 3:31pm

      Actually, the Germans are the largest tourist influx for Greece. And why would we get involved? These are all big kids, they can handle it themselves. America is already broke, our outgoing tourism is in sharp decline, I doubt they would feel it if we boycotted traveling to Greece. Let them fall, they’ll figure it out and get back on their feet without the help of the eurozone. Its not like this is the first time Greece has fallen apart.

      I have another question, when is it ever okay to force a people to take monies they don’t want? Weren’t there lots of screaming people people about being forced into taking bailout money here in the States? If the Will of the Greek People is to try and fix their system, then that is their Will. Why bother getting involved? I’m hoping Greece votes against this bailout and then falls apart and rebuilds itself, it will prove the rest of the eurozone that their global financial community concept is daft and dangerous.

      Report Post »  
  • GhostOfJefferson
    Posted on November 1, 2011 at 2:36pm

    Ok, so say the Greeks are eight balled out of the EU. They collapse, however, wouldn’t that lessen the imact to the rest of Europe significantly, since the EU wouldn’t be on the line to bail them out?

    Report Post » GhostOfJefferson  
    • AvengerK
      Posted on November 1, 2011 at 2:58pm

      Everyone sees the pattern except Wall Street, the European aristocracy and the lamestream media. Everytime the Europeans announce they’ve got the problem under control..it unravels on them again. Greece MUST be allowed to default. However a hard default will likely trigger Spain and Italy as well. Essentially the EU will be in tatters, European sovereign debt near worthless and the Euro a laughingstock. China was prepared to bail Europe out but lo and behold, Greece can’t manage itself..gosh what a shock? Let Greece default it’s only hope is to restore the drachma , change it’s foundation from socialism. Change to a free market that allows private investment and let Greeks realize the government isn’t their mother.

      Report Post »  
    • JohnnyMidknight
      Posted on November 1, 2011 at 3:07pm

      It is because the are all looking for consensus… Is everyone wiggling their fingers up or down? LMAO

      Report Post » JohnnyMidknight  
    • AvengerK
      Posted on November 1, 2011 at 3:20pm

      JOHNNYMIDNIGHT…get the nomenclature right..“up twinkles”. and “down twinkles”. Yes…that $100K college education (that the stinky OWSers want someone else to pay for) is reaping some serious rewards isn’t it?

      Report Post »  
    • Lloyd Drako
      Posted on November 1, 2011 at 5:08pm

      If the Greeks are kicked out of the EU, “who’s next” speculation is likely to run rampant, triggering runs on Italy and Spain.

      Report Post » Lloyd Drako  
  • Bill Wallace
    Posted on November 1, 2011 at 2:34pm

    And THIS is why socialism doesn’t work.

    Clearly outspent what they brought in, all the social programs. Now having to tell all the lowlifes they have to get off their rears and get a job.

    Report Post »  
  • smithclar3nc3
    Posted on November 1, 2011 at 2:31pm

    Apparently economics is all Greek to them….lol

    Report Post »  
  • LookingforJustice
    Posted on November 1, 2011 at 2:30pm

    Any chance the country of Greece can replace Papandreou with Obama? Obama favors the majority living off of the government and union $$$ and WE THE PEOPLE wouldn’t mind the transfer!

    Report Post »  
    • joyceram
      Posted on November 1, 2011 at 3:25pm

      LOOKINGFORJUSTICE, Your remarks gave me a good laugh. Needed that. Thanks

      Report Post »  
  • StanO360
    Posted on November 1, 2011 at 2:24pm

    The greeks are a bunch of yahoos.

    Report Post »  
    • Gonzo
      Posted on November 1, 2011 at 2:32pm

      Are we any better? We can’t even quit funding NPR and the Endowment for the Arts! Half the people in this country are no different from the Greeks, look at Madison Wisconsen last winter. When we are finaly forced to live within our means, we’re going to make the Greeks look really reasonable.

      Report Post » Gonzo  
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