European heads of state are meeting in Brussels Wednesday to discuss the euro zone's sovereign debt crisis and more importantly, the fate of Greece. Germany's Angela Merkel expressed a willingness to drop some of her austerity demands on Greece at last weekend's G8 summit; some fear this reversal comes too late to save the euro zone from disintegrating.
Greece, the heavily indebted EU nation reeling from high unemployment and the $170 billion austerity program called for by European leaders and the IMF, will hold new elections June 17 after inconclusive elections on May 6 left political parties struggling to form a coalition government. Most analysts view the June election as a referendum on whether Greece will remain in the 17-member euro block. Some economists such as Nobel Laureate Paul Krugman believe that a Greece exit could happen as early as next month — but with dire consequences for the region. Merkel, the lead proponent behind Europe's budget-cutting proposals, has publicly said she wants insolvent Greece to remain in the euro zone. A Greek exit could hasten the country's economic collapse and put Greece on a collision course with Europe. Nearly 80 percent of Greeks want to remain in the euro.
William Black, a professor of economics and law at the University of Missouri, Kansas City has been predicting a Greek departure for quite some time. He says Greece's political chaos, financial burdens and economic instability will tear Europe apart socially, politically and economically if the debt-ridden nation remains in the euro zone.
"Well the hope is Greece will leave the euro—the euro is inherently flawed in its design," Black says in an interview with The Daily Ticker. "The worst conceivable response would be to let Greece twist in the wind."
Black, a vocal critic of Germany's pro-growth policies, says he doubts whether Merkel has truly softened her stance on austerity. He notes that every political party in Europe that embraced austerity — left or right — was defeated in recent elections by disgruntled voters. The French put into power Socialist Francois Hollande over presidential incumbent Nicolas Sarkozy and the solidly pro-austerity Dutch government broke up after budget talks collapsed over pro-austerity objections by members of parliament. Anti-austerity rallies have rocked countries across Europe, sending a clear message to those in power: the public is fed up with Europe's sharp spending cuts and won't stand for the harsh measures that are intended to resolve the area's fiscal crisis.
"Austerity…is an inconceivably awful policy," Black says. The European periphery nations are suffering great depressions — not recessions - he notes, and the region's best and brightest are emigrating from Europe because of high unemployment and economic uncertainty.