Another weekend passed, another Eurozone crisis summit passed with it. There is a growing divide as on how to handle this Greek tragedy. You have Germany on one side which fights to maintain the current Euro structure which hurts Germany more than any other Eurozone member. Austria has voiced that Greece should get an additional two to three years and taken the opposite stance of the German camp which is against any delays, quelle surprise, while the Netherlands claimed that they would block any additional assistance to Greece such as a third bailout so many have hoped for.
Greece has asked for up to two more years in order to achieve the required budget cuts, reforms and repayment of two bailouts the country received. Germany is the biggest opponent of such move while the Netherlands take another hardline stance and killed the idiotic idea of a third bailout. Despite Germany’s opposition to modified terms the country continues to refuse to accept that Greece needs to be forced out of the monetary union in order to address the structural problems in the core of the Euro.
Greek Prime Minister Samaras flew to Berlin in order to plea and beg for an extension as well as the end of talks about a Greek Euro exit German Chancellor Merkel warned that Eurozone members should be careful with their public remarks about the Euro as well as the Greek exit and acknowledged that the Eurozone has reached a decisive phase.
Germany also opposes the ECB bond buying frenzy which many expect will start soon. Merkel voiced tepid support of the ECB during her trip to Canada, but faces stiff opposition as there are several at least semi-intelligent German policy makers who realize that the ECB approach would be harmful to the Eurozone economy and would also violate ECB rules which prevent the ECB to make finance governments.
Weidman, who runs the Bundebank and succeeded Axel Weber, understood that ECB financing of member countries will spiral into a drug addiction which will be hard to cure. Japan as well as the U.S. are prime examples of bailout addiction which has causes Japan to already lose one decade while it currently works on losing its second decade and the U.S. is in the middle of its first lost decade as a direct result of its bailouts.
Greece has held the Eurozone hostage for too long and it is time to cut the losses. The Euro debt contagion firestorm flared up in Greece and has spread like wildfire in the Eurozone periphery with hotspots spanning the entire European Southern hemisphere. Politicians as well as policymakers have failed to understand that a Greek exit followed by a Portuguese exit is key for the restructuring of the Euro.
Greece had over 30 months to implement budget cuts and reforms and so far have always came up short as they are used to extensions and modification. There has always been hardline talk and as a deadline approaches politicians find a way to give Greece an extension as they do not want to admit total failure. The longer it will take to cut Greece the harder the negative impact will be and the longer its ripple effect will last. Hundreds of billions of Euros could have been saved and spend on areas of the Eurozone economy where they would have contributed to a positive impact.
Greece will need to be forced out sometime in 2013 in order to start the recovery process. Greece needs to be forced out sometime in 2013 in order for necessary reforms to be implemented. Greece is bleeding Euros faster than other economies can create it and the first thing required is to stop the bleeding. Greece needs to be forced out by 2013.