Greece Should Never Have Been a Part of the Euro

Now that the Greek debts have been transferred from the banks to taxpayer funded institutions like the ECB and the IMF, it may be time for the eurozone to 'allow' Greece to default on its debt.

This has been a favourite policy in EU lately,as we have seen taxpayers been called to support ailing banks via bailouts, bad banks, bond purchases, etc.

Greece seems like a liability right now and it is, as all programmes put together by troika have been based on very optimistic targets (that are failing to materialize time after time).

Overall, the Greek debt is not going to become sustainable in the near future and a third bailout and/or haircut will be necessary to prevent a Greek collapse.

At the same time, the situation in Portugal and Ireland is not improving as their debts are increasing making it debatable whether they ll be able to access the bond markets soon. Spain is in big trouble and Italy is getting there. France is not getting any better and Beglian debt is too high for comfort. Hungary is asking for more help from the IMF as its economy is sinking back into recession. The global economy is slowing down reducing manufacturing orders in Germany whose debt is accummulating to become equal to the overall German GDP.

The situation is far too bleak as, on one hand more bailouts are needed, on ther hand, the bailing out countries are approaching their bailing out limits.

High sovereign debt, less manufacturing orders, higher interest rates (after downgrades) and an increasingly reluctant to bailout German public in Germany will collide with the greater need for bailouts in the periphery.

At some point, the bailout need will become too much of a burden for Germany and she may prefer to exit than continue mortgaging the country to bail out its banks. Euroscepticism may increase in Germany once the crisis will start hitting the core.

In any case, the higher sovereign debt of Germany will affect the country's social services and welfare system as it is impossible to continue with bailouts, generous social network and corporate friendly taxation all at the same time. Something has to give.

Greece should try to get out of this mess as soon as possible because, the whole euro crisis may not end well for Europe. Several countries may be forced to default or their economies will be greatly affected by long term austerity and stagnation.

TP 11:29PM June 09, 2012