Time
June 23, 2011
Crisis, drama, Herculean, Sisyphean, hubris and catharsis: the Greek language offers some apt words to describe Europe's current dilemma. But classical references are of limited value when it comes to unpicking the modern-day Gordian knot that Greece represents for the euro zone.
Although European leaders cheered the confidence vote on June 22 confirming a new Greek unity government, they were well aware that the political tensions in Athens are but one part of a broader drama that could yet shatter the euro. The currency is still very much in peril, and in the European Union's corridors of power, the 17-nation euro zone's demise is being talked of in louder tones. With E.U. leaders meeting Thursday and Friday for a summit that has been overshadowed by the crisis, the mood in Brussels — and in all other euro-zone capitals — is as low as it has ever been.
It's not hard to see why. Greece is all but bankrupt, with little to show for the reforms and cutbacks pushed through since the E.U. and the International Monetary Fund's first €110 billion ($160 billion) bailout just over a year ago. Last month, the European Commission forecast that in 2011, Greece's economy would shrink 3.5% and its budget deficit would hit 9.5% of GDP, considerably higher than the 7.4% target set out in this year's budget and agreed upon by E.U. and IMF creditors. Indeed, the brutal austerity measures imposed on Greece are choking off growth, making it even less likely that the country can pay its way out of the crisis. Protests are mounting in Greece, and like the nation's economic woes, the angry demonstrations seem to be spreading across Europe.
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