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An elderly man feeds pigeons on Syntagma Square on November 3, 2011 in Athens, Greece. Greece stands on the brink of economice collapse as political disagreements continue concerning the financial aid package proposed by the EU.
At this point, the Greek debt crisis probably seems like it's been going on forever. It hasn't, but it seems to defy resolution. Last Friday, the country finally defaulted, in a strictly technical sense, on part of its sovereign debt — an outstanding slice of private bondholder debt that was insured by the dreaded credit default swaps. The agency that determines whether those swaps — which amount to a bet that a country won't be able to keep up with its bond payments — should pay out said, "Yep, Greece has defaulted." Felix Salmon and John Carney provided a good explanation on Marketplace at the end of last week.
The main issue for Greece is just how long it's going to have to suffer. The austerity measures that are being forced upon it in exchange for more bailout money from the European financial authorities are setting it up for a decade of pain. On the plus side, Greece stays in the eurozone and has access to financing through the currency union; something can always be worked out...however...s-l-o-w-l-y. On the minus side...well, there's all that austerity and aforementioned pain.
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People stand next to a stand as newspaper bearing headlines on the greek crisis, are on display on November 7, 2011 in Athens. Greece's top politicians put the finishing touches to a unity government and begin talks on a new prime minister as markets react cautiously to a historic power-sharing deal to stave off bankruptcy and keep the country in the euro. AFP PHOTO / LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
Martin Wolf is, according to many, the best finance and economics journalist in the world. From his perch at the Financial Times, he dispenses regular wisdom and concise opinion. And it's wisdom and opinion that's backed up by having done time on both sides of the major economic divide of the age: free markets versus central governments.
The ongoing eurozone crisis has involved all sorts of deep-dish coverage, ranging from sovereign debt bond-yield spreads to debates about tax policies and budget cutbacks, with gobs of court-intrigue political analysis and EU-ology thrown in. It's frankly dizzying. Also, the debate has gone exactly nowhere. The eurozone remains in crisis. Whatever political will is being deployed has been, it seems, devoted to perpetuating rather than resolving the problem.
Just because markets are up in the U.S., that doesn't mean Europe isn't still basically going to hell. The Eurozone hasn't been granted a reprieve simply because a few prime ministers have been sent packing. Greece still has massive debt. Italy still has massive debt. Spain still has massive debt. This may not end well. At least, it may not end with the euro surviving as a currency.
Storify tells the tale:Follow Matthew DeBord and the DeBord Report on Twitter.
I've been following the increasingly rapid collapse of the eurozone on Twitter. It's remarkable how many active tweeters have both views on the future of the European single currency or want to link to people who do. Anyway, I've found Storify to be a useful tool to capture this chatter. See below:
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The European currency Euro logo stands in front of the European Central Bank (ECB) in Frankfurt/M., western Germany on August 4, 2011.
Greek gets a new government. Italy will soon get a government. And still the markets aren't calmed. The Dow flirted with a 400-point drop all day before closing at minus-389. Meanwhile, German Chancellor Angela Merkel and French President Nicolas Sarkozy have finally just come out and said it: There should be two Europes — one run by...Germany and France, with the Euro as its currency; the other limping along with whatever's left in the Franco-German wake.
For critics of the Euro — and there have been plenty since the single currency was introduced in the 1990s — this is an "it's about time" moment. But even relative supporters are yelling surrender. At the Financial Times, Martin Wolf throws up his hands:
Will the eurozone survive? The leaders of France and Germany have now raised this question... If policymakers had understood two decades ago what they know now, they would never have launched the single currency. Only fear of the consequences of a break-up is now keeping it together. The question is whether that will be enough. I suspect the answer is, no.