George Papandreou was staring at the hole from 20 billion to the budget of his country. Often the newly elected leaders to find that do not have enough money to pay for their election promises.
When the government realized the Athens budget disaster faced by, days after taking office in October 2009, European capitals is still suspected nothing, writes Bloomberg.
“Do not exaggerate the problem,” said in the autumn of 2009, German Chancellor Angela Merkel. “Deficits have in other parts of the world.”
This initial reaction was a harbinger of the failure of European politicians to tackle the crisis, which enters its 21st month and makes the world community to trapne the prospect of new financial tsunami, however, that the effects of just-past are not yet fully resolved.
On June 7, Barack Obama told Merkel that her job is to stop the “uncontrolled vortex of bankruptcy.” On June 14 the Chinese central bank warned of “very serious risk” emerging in Europe.
“The situation is quite unpleasant,” says Paul de Gre, an economics professor at Catholic University in Leuven, Belgium. “Best-case scenario would be able to strengthen the position for the next 6 months. Another scenario is things get out of control. ”
Assistance of 256 billion euros for Greece, Ireland and Portugal achieved nothing more than to gain time and postpone the bankruptcy, said Andrew Balls, director for Europe of the Pacific Investment Management Co. The cost of insuring debt of 25 major banks and insurers has risen to 162 basis points from 120 points on April 8, data compiled by JPMorgan Chase & Co.
Insurance against failure of Greece – the most expensive in the world – shows that the country the chance to be forced to restructure its debt is 75%.
The situation is quite hopeless
“If you just look at economic data for Greece, the situation looks hopeless. Data would make you think that failure has happened, “said Balls.”If you can put Greece, Ireland and Portugal quarantine, removing these countries from the market, while reforming their economies, then you will gain time for Spain and the banking sector and will give them a chance to recapitalize.
Tonight and tomorrow at a meeting in Brussels, EU leaders will again discuss the Greek dilemma precision the size of new loans to Athens and how to make Greek debt holders to participate in the bailout.
Three months after the proclamation of “total solution” to the crisis no one the illusion that the meeting could be achieved lasting solution.
Reform fatigue
“Reforms are difficult,” said European Commissioner for monetary affairs commissioner Olli Rehn on June 20. “Reform fatigue is visible on the streets of Athens, Madrid and elsewhere, as is evident in some eurozone countries, which bear the main burden of providing emergency loans.”
Last week police in Athens used tear gas to disperse protesters against measures to tighten the belt. Demonstrations in front of Greek Parliament continued for 4 weeks and Greeks Papandreou condemned as an employee of the year, the International Monetary Fund (IMF).
New division began to show between the rich led by exports and fiscal discipline and poor European north south, which suffers from low economic growth, says a study by the Center for Economic and Business Research (CEBR).”The euro will collapse – not this week, but probably in 2013,” said CEBR in post by June 20. London-based organization predicted that the first area to leave Greece, which will favor growth and jobs in Europe to the imposed measures to curb costs.

Mayor of London Boris Johnson said the finance ministers of Europe must leave Greece to fail because of their debt and be forced to leave the area as a result of “reckless” behavior, said the newspaper “Guardian”.

He also said that removing the country mired in debt in the euro area “is now almost inevitable.” Mayor of London said that the single currency is to blame for the “deterioration” of the international financial crisis and warned that should not be expected that the coalition government of Britain will help in any way for a new rescue program for the Greek economy .

Johnson is still one of the most conservative politicians who think that Greece should be allowed to go his own way, the publication noted.
“For years, European governments say it is unreasonable and impossible to leave one country euro area”, says London mayor ‘Daily Telegraph’. “But this second option is now almost inevitable and the sooner occurs, the better.”

He hinted that “wasteful” behavior of Greece was encouraged by its membership in the euro area. “The euro has worsened the financial crisis, encouraging some countries to behave as recklessly as the banks themselves,” said Johnson.

“It is that we are involved in this rescue system to protect banks, including our own. But after having the fear of default, after the uncertainty continues, confidence will return to Europe”, underlines the Mayor of London.

Meanwhile, the new government spokesman in Athens Mosialos Elias said that a referendum on reform of the Greek constitution in the autumn will be “to try to end the current crisis faced by the country.”

“Referendum will be in autumn, and in September it will be preceded by a broad dialogue which will be invited to all citizens wishing to express their point of view,” said told reporters today Mosialos.

“Constitutional reform will involve primarily the political system itself and the turmoil that now she is experiencing,” the spokesman added no other details.

According to opinion polls Greeks have lost all confidence in the political and judicial system that never managed to eradicate the rampant corruption in the country.