The Parliamentary Vote in Greece earlier this year has raised hopes of an early resolution to some of the long pending problems of the Euro zone. Will the current measures be enough to stabilize the regional economy, or are we heading for more trouble in the next few months?
The acceptance of the austerity measures by the Parliament of Greece has brought some relief to all investors around the world, an indication perhaps, of how the global economy has become highly interwoven today. However, there remains a lot of resistance from a significant section of people there, which puts many questionmarks over the ability of the Greek Government to persist with the necessary austerity measures for a long enough duration. There are also doubts about whether the measures being adopted now will be enough or will future see more pain.
The current crisis is also putting a lot of pressure on the still evolving economic integration of Europe. It is a region still struggling between isolation and integration. Though many of the political obstacles have been more or less dealt with, the same cannot be said about the economic integration goals. The multiple currencies with varying strengths and characteristics of different
One of the major issues that may impede further integration of Euro zone is the varying capacity of different Euro Governments to deal with the post crisis global economy, where uncertainty has become inherent, the expansion cycles is slowing down, the QE3 is ruled out, crude prices have become volatile, China is not ready to allow its currency to rise beyond a very narrow band and amid all this, there are still uncorrected asset bubbles which keep threatening the global economy with yet new crisis.
The last crisis was primarily a result of asset bubble centered primarily around housing, which was exaggerated and later busted due to the high risk sub-prime debts being camouflaged as acceptable by means of opaque derivatives, that shifted risk between individuals without affecting the social risk in any way. While such sub-prime debts have now been largely taken care of, the asset bubbles still remain, and their dark shadow still continues on the globe. Right now, its darkest part seems to be over the Euro zone.