Faults of the Euro

                After Friday's discussion, I decided to research on how exactly Greece and other European nations ended up in an economic crisis. The problem lies in the structure of the Euro Club, (the 17 nations that share the same currency), itself. Individual countries are not bound to strict rules with respect to their national finances. That is, they can do whatever they want. One could visualize this situation as all of these countries sharing a single bank account, while each government is given its own debit card, without limit. As a result of this construction, some of the economically weaker nations started to live at a high rate since the introduction of the Euro. Banks thought they could safely grant loans to these countries, as these were covered by the other users of the Euro.With the international credit crunch, originating in the United States, interest rates got higher and the worldwide economy cooled down fast. Many countries had to invest large amounts of money in some financial institutions, as it would have damaged their economies even worse if these institutions were declared bankrupt. Thus, the hypothetical shared bank account was drained. This led to decreased credit ratings in many European countries and the Euro as a whole.

                 Many people are arguing to throw Greece out of the Euro, let them go bankrupt, or at least, not to spend another penny on them. What these people do not realize, is that most European banks have investments in many other European countries, including Greece. In other words, doing nothing will mean that some of these institutions might go bankrupt, or will need to be saved by the governments. Besides that, doing any of these things would greatly damage the credibility of the Euro, possibly driving interest rates further up and other members ending up in the same situation Greece is in right now.

                 Although understandable, the European countries should stop debating whether or not they should save Greece. Every wasted day means more doubts in the financial markets, and therefore higher interest rates and larger debts for Greece. There should obviously be rules with respect to the financial situations of the individual countries, and how to deal with situations like this one.