Europe Prepares For “Unprecedented” Intervention in Greece

On May 29th the Financial Times, a British newspaper, revealed that the European Union is contemplating an “unprecedented” intervention in the Greek economy. Europe is on the verge of launching this historic initiative because it has become increasingly clear that Athens will need at least another 100 billion euros in emergency financial aid in order to stave off what, for lack of a better word, can be described as bankruptcy. The intervention by Greek’s European partners may include such far-reaching measures as a European take-over of assets owned by the Greek government for the purpose of selling them off. International involvement in Greek tax collection and other revenue raising activities usually considered to be the exclusive domain of national governments, are also proposed.

After over a year since it was first revealed that the Greek government was near financial collapse, it has become clear that this Mediterranean nation is unwilling to implement the economic reforms needed to turn the situation around. Current Greek government borrowing runs at a shocking rate of 150% of the national GDP. Without additional loans from European partners and international institutions like the IMF, it is almost certain that Athens will default on its financial obligations – a scenario which would drag down the economies of other fragile European states.

Representatives of Greece to the European Union in Brussels have in recent days again suggested their country will have to give up the common currency, the euro, and return to the old national currency, the drachma, in order to deal with the crisis. This too is an unsavory option for the rest of Europe, as it will certainly lead to a loss of value for the euro. Nevertheless, Europe’s leading lender nations to Greece, such as Germany and the Netherlands are facing their own political dilemma, as recent polls suggest that support for extending further financial support to Greece is low amongst voters. To assuage voter discontent, the recent European proposal to take a direct hand in the Greek economy is seen as an attempt to appease voter apathy towards bailing out this vulnerable economy.

The contemplated intervention in Greece would compromise the sovereignty of that nation. However, in order to prevent the entire Eurozone (those European nations who use the euro as their currency) from falling into economic catastrophe, it is becoming increasingly clear that Greece, or any individual Eurozone country, cannot be allowed to mismanage their economy to such an extent. In this regard the situation in Greece sets a radical new precedent.

Perhaps recognizing that it may no longer be possible for individual member states who use the euro currency to individually manage their economic affairs without oversight, Jean Claude Trichet, the soon retiring head of the European Central Bank recently proposed the creation of a European wide ministry of finance. This new ministry would, amongst other things, manage to one degree or another the fiscal and budgetary policies of EU member states.

Such a proposal stood no chance of winning acceptance by the member states of the EU in times past. But these are not normal times, and as the rest of Europe prepares to in intervene in Greece minds are concentrated on securing Europe’s long term economic future.

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