After a lot of debate and strong resistance, it looks like Greece may be the recipient of up to $33.7 billion in aid from those countries using the euro as a currency, according to German magazine Der Spiegel.
The magazine reported that the money will be distributed in proportion to how much money form each individual country is held in the European Central Bank.
Germany has been against the bailout, but will have to pay somewhere around 4-5 billion euros for their part in the pay package; probably the largest amount of any one country. The KFW, the German bank owned by the government will take care of the practicals on behalf of Germany.
The capital will probably be offered through guarantees and loans.
Although there a lot has been made of the ignoring of the deficit rules of the European Union in relationship to Greece, where they went way beyond the required cap of 3 percent deficit in relationship to gross domestic product, to 12.7 percent, the truth is it looks like almost all, if not all of EU member states may be above the cap. That may be why things have quieted down some in hopes the public will not catch on to what all of that means and the potential disaster for not only the euro and the European Union, but the entire world if a number of states collapse under the burden of a weight they can no longer carry.
All of this exposes the weakness of the welfare state, and reveals it is not a sustainable working model for government, as corruption is systemic and inherent in the system, far more than it is in the free market.
Unconvincingly, Greek Prime Minister George Papandreou lectured the rest of the European Union for not sticking to the rules called the Stability and Growth Pact, which refers to the 3 percent cap mentioned above. Greece, as the situation shows, was the worst offender (as far as we know) and needs to clean its own house before being concerned about everyone else's.
His idea that transparency is needed is welcome, but that seems to be wishful thinking rather than reality, as all the European Union countries seek to ignore the rules for their own benefit.
With Greeks largely unwilling to rid themselves of their entitlement culture, it may be a repeat of the debacle in Argentina, which was a disaster for years, starting in 1999.
Some feel this is different in that Europe has a large interest in propping up Greece, but the problem is Greece isn't the only problem. They've got Spain, Portugal, Ireland and Italy in very precarious financial condition as well, which the European Union isn't strong enough to save.
Greece alone may be doable, although difficult, but anything more than Greece could cause the entire European Union to crumble, alone with the euro.
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com
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