Referendum in Greece and the renewed Euro Crisis

I am currently in Germany and I have been following the Euro Crisis closely. One of the reasons for that is that the Euro exchange rate influences how much the money I earn here will be worth in Canada. Also years ago I invested in some Euro bonds, which seemed a smart idea back then.

So, with relief I watched the Euro climb during the last few days and the DAX soar to higher and higher values – after the EU leaders reached a consensus on how to deal with their rising deficit problem. It almost seemed like the sky would be the limit for both the Euro and the DAX.

Everything was different though when I got up this morning! The Greek Prime Minister, Papandreou called for a referendum on accepting the European Union’s spending cuts and the abatement of half of his country’s debts. – At first I thought, this guy must be nuts! – How can you go and spit in the face of all those people that have been trying to help get your country out of the crisis? – But then I remembered all the riots and strikes and demonstrations that had been going on in Greece, as we had been witnessing on TV. Papandreous had to find a way to get his country to quite down and accept the harsh measures it will be facing for the next few years.

Though this may seem like a catastrophe from an outside point of view, if successful, it may prove to be a stroke of genius. If the mother country of democracy finds a majority of its voters accept the measures and consequences decided by the EU the country may finally be able to get back to business. Which ultimately will make the reforms work better.

If Papandreou loses the referendum, if the Greek people decide against the reforms and the dept abatement, we are all in trouble. I will kick myself for not having bought Canadian dollars on Saturday and my investments won’t be worth the money they were printed on. There already is one prominent victim: MF Global had to file for protection under Chapter 11 in the US.
Ultimately, if the Greeks decide against the reforms, the country will have to file for bankruptcy, leave the Euro Zone, and be in the hole for a very long time.

Well I guess Greece has to do what it has to do,  and we can only hope they will see the sense of what is required of them. Which I hope will be soon and the Euro will soar again and the DAX will bust 7000.

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