After Greece’s voters rejected the terms of the proposed bailout, the next 48 hours will determine the fate of the Euro.
Political leaders and central bankers must make two major, linked decisions. They must determine whether there is a future for Greece in the Euro at the heels of a “no” vote, and with Alexis Tsipras as a negotiating partner—and by extension, whether to press on with talks for a bailout package. Meaning, they must decide if they can maintain the emergency cash support that is keeping Greece’s ruined banks from collapse. Without the maintenance of these emergency loans, the major banks could come toppling down within days—forcing Greece to introduce a new form of currency.
What does all of this mean for America? Our banks should be fine, however the global stock market and American exports are directly affected by Greece’s economic crisis.
Take a look at this video clip from our program, Europe’s Debt: America’s Crisis?:
to view the entire program online, for free!
The drive for the Euro has been motivated by politics not economics. The aim has been to link Germany and France so closely as to make a future European war impossible, and to set the stage for a federal United States of Europe. I believe that adoption of the Euro would have the opposite effect. It would exacerbate political tensions by converting divergent shocks that could be readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.”
~ Milton Friedman