Crisis in Greece Deepens

Tonight Greece experienced its worst riots in months after parliament passed the new austerity measures forced on their government by the EU. Greece needed to pass the €3.3 billion of cuts in order to get a €130 billion bailout from the EU to avoid defaulting on its debts and exiting the Eurozone. Recovery is nowhere near the future for Greece, its bond yield is at 34% (the ‘danger zone’ is around 7%) and its economy is deep in recession. Unemployment stands at around 17%, the cuts will add even more people to the unemployment register, pushing Greece further into recession.

Rioters in Athens are fed up with the austerity imposed on them

Greeks are getting fed up with the cuts imposed on their country. They feel like democracy does not exist any longer and that the Eurozone leaders, particularly Angela Merkel, are the dictating Greek economic policies. Although Eurozone leaders rightfully fear the dangers of a Greek default and exit from the Euro, the damage it would do to many of Europe’s banks and how the contagion could spread to other weak countries such as Italy and Spain. The danger is that these cuts will put Greece in a position from which it will not recover for a generation, if ever. Merkel and Sarkozy need to be wary of the damage their cuts to Greek spending could do to the wider Eurozone.