The economic crisis in the eurozone is heating up world politics on the eve of G20 meeting. The financial crisis in Europe is getting critical day by day and threatening to drag the world economy into yet another massive depression. In such a situation, the European nation heads are at a loss to find a solution that is acceptable to all.
Greece is on the edge of becoming bankrupt, but the major economic powers are inclined to focus on Italy and Spain, which are safer bets. Should Greece get a fresh injection of help? Is it right to lend support to comparatively stronger economies like Italy and Spain? Europe is clearly divided when it comes to answering these questions. European Central Bank has agreed to buy Italian and Spanish Debt, but this has lead to the resignation of two members from Germany. The Bank’s outgoing President has resigned s well. Mario Draghi will be the new ECB President. Will he bail out his country? If he has such intentions, then he should be prepared for some stiff resistance.
There are major differences on other key issues as well. For instance, is it wise to use eurozone’s economic power (European Financial Stability Facility) to combat the crisis or save Greece for that matter? For President Sarakozy, the answer is a definite yes. For Germany, Europe’s strongest economy, the answer is no. Berlin wants to use this fund as a last resort. Sarakozy and Markel will soon meet to sort out this issue.
In any case, EFSF will not be enough to save Italy or Spain if their economies collapse altogether. Neither can it support Europe’s banks completely if Greece defaults on its debts.
The U.S has asked the European heavy weights to act fast. Obama and company believes that critical economic situation in this part of the globe is stopping the U.S to recover from the effects of the recent recession. Meanwhile, the BRIC (Brazil, Russia, India, and China) economies have urged the euro leaders to fix the economic crisis with utmost urgency. However, their appeals have been greeted with plain hostility and indifference. Nonetheless, political leaders from Europe need to come up with an answer before the G20 meeting.
With every passing day, people in general and investors in particular are becoming more and more hopeful about the recovery of eurozone. This substantially increases the stakes and the price of failure can be more than what Europe can afford.
