Concerns grow that Greece debt crisis could overstress European Bank
The Greece debt crisis, which is still subject to German parliamentary approval and may be challenged in court, is putting unsustainable stress on the European Central Bank, some analysts say.
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“Greece can’t do anything to stop the crisis,” says Lachman. “The ball is in the European court. Europe needs to come up with the money and do everything they can to avoid Greek default.”Skip to next paragraph
A second, less likely option, according to Charles Wyplosz, professor of International Economics at the Graduate Institute of International Studies in Geneva, is for Greece to restructure its debt obligations through the IMF without assistance from the European Union.
“European leaders don’t really understand the economic and fiscal implications of the actions they’re taking right now,” he said today by telephone, adding that the European response to the crisis has been reactionary and insufficient since the crisis began. “This restructuring option would leave them off the hook.”
Obstacles remain in Germany
Even if the terms of an agreement are announced in coming days, the bailout is not a done deal. A number of obstacles – most of which come from Germany – remain.
First, Merkel must manage parliamentary approval of the deal with local elections in North Rhine Westphalia, where the bailout is unpopular with voters and Merkel’s Christian Democratic Union-Free Democratic coalition is in danger of losing parliamentary power.
“If the government loses its majority, everything that Merkel wants to do for the rest of her term has to be negotiated with and accommodate the opposition,” Yale’s Mr. Cameron said by telephone. “It’s a political complication of the first magnitude.”
Immediate political considerations aside, the German parliament might be reluctant to approve bailout funds for Greece with similar crises in Spain and Portugal looming.
“Spain, Portugal, and Greece are all seen very critically here,” says Mr. Belke of the German Institute for Economic Research. “The German population does not accept the responsibility to pay for a generous social security system elsewhere.”
Even with parliamentary approval – which Belke says is likely, despite being unpopular – the German high court could rule the bailout package unconstitutional. Belke says a number of German economists are already preparing legal challenges to the aid package on the grounds that it violates EU regulations that forbid direct economic assistance from one European nation to another – a Greek bailout would clearly violate the euro zone's "no bailout" clause.
“The last uncertainty is the constitutional challenge,” he says.
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