What should we do about Greece?

If someone asked me what's the biggest news story that's been interesting me in recent weeks, I'd have to say the financial crisis taking place in Greece.

Before you start thinking that's boring, I'm gonna click onto something more interesting, hold on a minute!

This is interesting - you've got Euro politicians and political commentators arguing this is the biggest crisis to hit Europe since the Second World War!

I've been giving this story a lot of thought. There's a number of questions that I've been thinking about in the last few weeks.

1. Is there much point in giving the Greeks anymore money?

2. Should the Greeks even be in the Euro? Would it be better for them to leave?

3. Does this crisis just prove that there's a limit to how much economic and political integration you can have in Europe?

Greece is well and truly f*cked! I'm sorry I can't think of another word that best sums up the situation the country is in.

The Greeks have no money to pay their national debt which stands at around 340 billion euros - that's one and-a-half times the value of everything the country produces.

In return for a new EU Loan to stop the country from going bankrupt, the Greek government is having to implement severe austerity measures, which means government spending cuts, jobs loses and tax increases.

No wonder the Greeks are feeling the pain and taking to the streets to protest against their leaders. If I was Greek I'd be thinking why should we stay in the Euro if it's going to mean so much economic pain.


What's best for Greece?

It's generally accepted now that it's only a matter of time before Greece defaults on its debt repayments, so what should it do next.

Probably leave the Euro. Write off some of its debt, and devalue its currency which will hopefully mean a return to economic growth.

Greece has too much debt which it can't meet. It doesn't matter how much more loans the EU give the Greeks, they're never going to be in a position to pay it off.

One of the things I've discovered is that nobody in Greece pays taxes. Well only half the population. They have a small private sector and a huge public sector. The country simply doesn't generate enough revenue to pay its debts.

There's probably no point in throwing more money at Greece if it can never pay this money back.


What's best for European Union?

The complete opposite from what I can see.

The last thing the EU wants to see is Greece default or even leave the Euro. If that happens the Euro itself is at risk. Not only that, it would mean enormous losses for the European Central Bank, which would be humiliating, but also for a number of French and German banks.

On top of this, there's the domino effect everyone keeps talking about. If Greece defaults on its debt, then the worry is that Portugal and Ireland will do the same and have their debts written off.


The question of Spain

Last week I was watching a video featuring the BBC's economic and business editors Hugh Pym and Robert Peston give a briefing on the Greek crisis. Interestingly they talked about the issue of Spain being crucial to what's going on.

The EU doesn't want the Greek crisis to spread to Ireland or Portugal (this could cause problems for British banks). If it did it could potentially spread to Spain which would the nightmare scenario for the EU.

Spain's economy is bigger than those two countries along with Greece, but it's economy is only just emerging from recession. If Greece, Portugal and Ireland needed a bailout it could knock the Spanish economy back into recession, which would be a disaster for the Euro. Spain itself could even need a bailout. The costs for that would be huge.

Hope you're keeping up with this!

Their opinion is that by propping up Greece with further loans, this will hopefully allow the stronger and more important Spanish economy to grow, so that if Greece was to default sometime in the not too distant future Spain would be in a stronger position to counter any domino effect.

It's complex stuff, but it got me thinking; what's best for Greece simply isn't in the best interests of the Euro, the EU, and particularly Germany.

I don't really know much about Greece's economic and political history, but from what I've learnt in recent weeks, I'm beginning to wonder whether Greece should have been admitted to the Euro in the first place.

The economies and political cultures of some of the Europe's southern states are completely different to those countries in the north.

You can't have a one size fits all economic model for all of Europe. I suppose this is the argument that Euroceptics use.

Although I don't consider myself a Eurosceptic, I understand where they're coming from. There's probably a limit to how big the Eurozone can realistically be.


Germany are the real winners

I'll probably sound like a real Eurosceptic when I say this, but Germany appear to be the biggest winners from having the Euro and the crisis in Greece. For years countries like Greece used to borrow cheap cash from the EU and they used that money to buy lots of German goods.

German exports have benefited from having the Euro. If they still had their old Deutsche Mark it would have been valued a lot higher against other euro currencies which would have harmed German exports.

For the Germans its better that they keep the Euro going in the long run. Great for them but not what you want to hear if you're Greek.

See this wasn't that boring at all was it?

It's complex but fascinating stuff as it's made me think more about the benefits of having a single currency. Who really gains from it? Maybe a common currency only works with a smaller number of countries who have similar political and economic cultures, like many of the northern European states.

We might be facing tough times here in Britain but at least we're not Greek.