To Converge or Not To Converge – the Greek Tragedy Continues
It seems a long time ago, but when the Euro was introduced, one of the cornerstones for membership and for the long term success of the Euro was convergence of economies within the zone. Convergence does not seem to be on politicians’ lips at the moment but what we are seeing happening across the Eurozone is as much a result of divergent economies as anything else.
Some countries under the cloak of the Euro borrowed way beyond their means, creating a false convergence of kinds in government coffers. The bond markets lent and the countries spent. Now the Eurozone finds itself in a difficult position, devaluation of individual currencies has been replaced by austerity and bailouts at the same time as the cost of the historic borrowing rises, dragging more and more money out of an already stressed economy.
So where does it end? We are in largely uncharted water at the moment – the Greeks have voted for more of the same “medicine” and to try and stay in the Euro. But this is an untested treatment and if one was to use a pharmaceutical analogy there is no certainty the treatment would get past the drug regulators as safe for human trials.
The situation is serious and the infection is spreading, if it was a medical decision to save a life maybe if would be safer to opt for a treatment that had been shown to work. But the Greeks seem to have chosen the new treatment – let’s hope they are right.
You may have an interest in also reading…
Green Bonds: How Active Management Aims to Make the Most of a Dynamic Sector
The market for financing linked to environmentally friendly projects and companies has already reached $1trn by some measures and we
World Bank Support to Promote Transparency, Accountability and Job Creation in Jordan
A US$250 million loan, approved last week, will ease Jordan’s fiscal strains, which have been deepened by the influx of
Government of India and World Bank Sign $500 Million Agreement to Improve Access to Finance for Micro, Small and Medium Enterprises
The Government of India and the World Bank today signed a $500 million loan agreement for the MSME Growth Innovation