Friday, January 23, 2015

How Greek Default May Sill Unravel the EU

by Frank Hollenbeck

Mises Daily

January 23, 2015

Greece is back in the headlines. This should be surprise no one. It was naïve to think that Greeks would accept being debt slaves forever.

Despite all the rumblings that Greece will be forced to leave the Euro, there is in reality no mechanism by which EU countries can force a Eurozone member to exit the currency union. It really is all a bluff. This is a standard scare tactic used by governments to induce people to give up freedom for a little security.

Greece currently owes a little over 300 billion euros to various creditors. About 200 billion is owed to the EU institutions, the European Financial Stability Facility (EFSF), and the European Stability Mechanism (ESM), that raised funds based on EU guarantees. The remainder is owed to the IMF, ECB, and private creditors. If Greece were to default, it would probably be mostly on the debts owed to the EU. To get Greece down to a manageable debt level, a default of at least 150 billion euros is necessary.


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