Greek Deadlock Heightens Fears Of Full European Crisis

Political deadlock in Greece on Monday stoked a renewed sense of crisis about the fate of the European economy as new data confirmed a downturn in one of the world’s major trading blocs, The Washington Post reported. The immediate focus was on the inability of Greek politicians to form a new government after divided elections last week — raising the possibility that the country may yet reject a recent international bailout agreement and leave the euro currency union. But the broader concern was how the global system will cope if the European crisis takes full root — an issue likely to top the agenda this week when President Obama hosts leaders of the Group of Eight heavily industrialized nations at Camp David. An exit by Greece is likely to raise concerns that other countries might also drop the currency and that the bigger Italian and Spanish economies may be in danger if investors decide they are too risky. On Monday, Greek President Karolos Papoulias, the nation’s ceremonial head of state, met with leaders from the conservative New Democracy and the Socialist Pasok party in a last-ditch effort to forge a new government. But the far-left Syriza party, which opposes the international bailout program and the strict economic measures Greece must accept in return for the loans, declined to participate. Read more.

In a related story, The Guardian reported that two years ago, the prospect of a state falling out of the single currency area was unthinkable. But as the Greek electorate turns against austerity, it is becoming all too easy to picture how breakup might happen. Read more.