This fall will bring with it several key moments for the survival of the euro currency. Eurozone in recent years has gone through several critical moments, but September is a crucial for the survival of the euro. “September will undoubtedly be the deadline,” warned an EU official on condition of anonymity, quoted by Reuters. This fall brings elections in the Netherlands, where the government fell in April because of a dispute on austerity measures.
Also in September, Greece will find out if it can renegotiate the terms of the financing agreements concluded with foreign creditors, and the Supreme Court of Germany, the Constitutional Court will decide whether the government in Berlin will contribute again to the European financial assistance fund worth €500 billion. German court verdict is vital, given that Germany has been pumping the most money into the fund for saving shaky European economies.
Eye on Spain
With the worsening situation in Spain, the fourth largest economy in Europe, and with the risk of contagion in Italy, the third largest European economy, an unfavorable decision to the Eurozone given by the German court would leave virtually powerless the Eurozone. Preliminary calculations show that, if they need financial help, Spain would call for double the funding assistance to Greece, Ireland and Portugal combined.
A similar scenario for Italy would be darker, as the Italian economy is two times larger than the Spanish economy. The Netherlands’ elections, from September 12, may influence the negotiations with Greece because a Dutch vote for anti-austerity will complicate Athens’ negotiations for better financial terms. Although officially there are no new negotiations for Greece’s debt restructuring, many argue that these discussions should take place if the Greek state wants to have a chance to overcome the tough crisis which it had been fighting for years. At the end of August, foreign creditors will prepare an updated report on the economic situation of Greece which will be the basis for negotiations in September.
Reply