Tuesday, May 15, 2012

An Overview of Recent Events In Eurozone

This post is by a blogger who is not surprised by the problems in the eurozone.  He provides a critical outlook on recent events in Germany, Greece and Spain.  He argues that the recent elections in Germany's most populous state are a setback for Angela Merkel. He acknowledges that the election focused an local personalities and issues, but he also suggests that what happens in Germany's largest state is a bellwether for national elections.  The problem is Greece has escalated to the point in which none of the major political parties are interested in forming a government charged with implementing the unpopular austerity measures.  The public believes that austerity has been imposed on Greece by external forces.  The most recent concerns in Spain are about the health of its banking system.  The banks have written down the value of their loans to real estate developers and they may need help from the government as real estate prices continue to fall.  One bank has been bailed out, but the government does not have the financial means to deal with a broader banking problem.

It seems clear that the eurozone problems are not easy to resolve.  Discussion are underway about policy changes, but one wonders whether the medicine that might be prescribed will be adequate to the task.

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