Uncertainty in Europe Looms Ahead

16 Jan, 2012

The financial turbulence of 2011 has set the stage for 2012 in Europe to begin without any concrete solutions, and many of the same problems as were faced last year across the continent.

The year has begun without the final word on whether Greece will manage to hold on to its Eurozone member status. On October 31st of last year, then Greek Prime Minister George Papandreou announced his government’s intention to bring to referendum the matter of the terms of Greece’s Eurozone bailout deal. The referendum was supposed to take place in December of last year, or early this year, however the plan was scrapped after vehement opposition from both the Greek parliament and Greek citizens.

Even with Papandreou gone, it seems that the withdrawal of Greece from the Eurozone remains on the table for the debt-stricken country.

In October, EU leaders agreed on the latest €130 billion bail-out for Greece, on the condition that the Greek government makes further cuts to public spending, privatises more services and state-owned companies, and seriously tackles issues of tax evasion.

Greece is still waiting to secure its second EU-IMF bailout, which will no doubt demand additional cuts that the Greek government will have to bow to.

Whether Greece will be able to meet the terms of the new agreement is still yet to be seen. Government spokesperson Pantelis Kapsis told Skai TV on Tuesday, January 3 that ”the bailout agreement needs to be signed, otherwise we will be out of the markets, out of the Euro.”

The Greek parliament has already raised taxes and introduced spending cuts, but with the austerity measures required by the next bailout offer still unknown, Greece is asking itself just how much can be cut.

Kapsis continued, “I also don’t believe it is easy to impose new taxes, but what does cutting spending mean? To close down the public sector? There is no easy solution.”

Luc Coene, a Governing Council member of the European Central Bank (ECB) is confident, that even if Greece were to leave the Euro, the rest of Europe would stand together to defend it from further degradation. “If the Greeks decide to leave, something that to me seems completely inconceivable… Europe will certainly stand shoulder to shoulder to protect the system,” he told the newspaper La Libre Belgique.

Even with retail sales falling by 0.8% across the Eurozone in November, and unemployment rising to 10.3% with 587,000 newly unemployed added since a year previous, Mr Coene remains confident that Europe as a whole is taking control of budget deficits.

“I think that, for the moment, we are starting to have control over the situation,” he said.

As the turbulence and uncertainty of 2011 slips into recent memory, economists and politicians across Europe are warning of a more turbulent 2012, but a 2012 that will be more predictable and controlled, if such terms can be applied to the European crisis.

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