World markets experienced dramatic losses and rebounds last week as investors watched economic developments in Greece with growing anxiety. The jitters come after weeks of gathering turmoil in the Eurozone, starting earlier this month when credit rating agency Moody’s Investors Service downgraded Greek debt to CAA1 and indicated a 50% chance that the country would default on its bonds. Just two weeks ago, Standard and Poor responded by downgrading Greek debt to CCC, giving it the lowest credit rating for any country in the world.
One fear is that the contagion of a Greek default would spread throughout the Eurozone, causing borrowing rates for other fragile European economies in Ireland and Portugal to skyrocket. A Portugal default would be a massive hit to the Spanish banking system, which has the largest exposure to Portuguese debt in the Eurozone. Now Moody’s has threatened to downgrade the credit worthiness of some of the largest Italian banks, and has put the Italian public debt on review for downgrade.
The EU and the IMF have scrambled to throw together a second massive bailout for the tiny Greek nation, this one expected to be worth 120 billion Euros, with 12 billion Euros of those funds to be disbursed early next month. The Greek parliament will have to vote this week on whether or not to accept the package, which contains another round of punishing austerity measures as conditions for the funds.
As European leaders scramble to further ensnare Greece in a web of bailouts, the Greek people have once again taken to the streets en masse to protest the austerity cuts that are the condition for the so-called rescue. Mass riots have turned the streets of Athens into battlezones between protesters and police, with demonstrators throwing stones and petrol bombs, and police returning fire with tear gas and stun grenades.
These protests are reflected in similar large scale marches in Spain, where demonstrators from Barcelona, Valenca, Cadiz, and other areas of the country plan to converge for a mass demonstration in Madrid next month, where activists have been occupying the central square for several weeks. Now the Germans are beginning to show their frustration at shouldering the brunt of the burden for the Eurozone bailouts, with German Chancellor Angela Merkel under attack by members of her own party for her handling of the crisis.
Puzzlingly, the fact that so many European nations are on the verge of economic collapse and the future of the Euro itself has now come in to question has not only failed to give proponents of European integration pause for thought, it has emboldened them to use the crisis to argue for further centralization of power in the European Union.
TRANSCRIPT AND SOURCES: