Talks between Greek government representatives and its creditors have once again yielded no results on Wednesday. The proposed reforms have fallen short of the necessary commitments for the dispersal of another tranche of aid to the most indebted country in the Euro Zone.
The country is on the brink of a sovereign default as it has to make a payment of about €450 million to the International Monetary Fund (IMF) on the 9th of April. Should it fail to deliver, Greece is most likely to default.
“If it turns out that the Greeks leave, that may not be a bad thing for the euro”
While many fear such a development could spark a round of sovereign defaults across the Euro Zone, one strong voice has his own opinion on the matter. Warren Buffet has outlined in an interview with CNBC that Greece exiting the Euro Area might not actually be a ‘bad thing’ for the euro.
While explaining that the euro has been poorly designed from the beginning, Buffet said that the structure of the Euro Zone can still be changed and the number of countries remaining in it does not have to be the same as it is now. The multi-billionaire investor said, “It could be a good idea (in) several ways if everybody learns that the rules mean something.”
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“If it turns out that the Greeks leave, that may not be a bad thing for the euro,” he concluded.
We couldn’t agree more – as the Maastricht Treaty’s rules have been broken numerous times by countries from Germany to Greece, there is a lot of work to be done by European institutions in order to re-establish credibility of the euro. One such way is to make an example of what happens when a certain country fails to abide by the rules of the treaty.
Growth forecasts of the Greek government for 2015, imply a rate of 2.9 per cent for 2015
After the meeting of the Euro Working Group (EWG) yesterday, Greek government officials insisted that progress was being made, however, the tone from the other side of the pond has not been as optimistic due to lack of pensions and labour reforms, which are critical for reaching an appropriate fiscal target.
Another point of worry are the growth forecasts of the Greek government for 2015, implying a rate of 2.9 per cent for 2015 and 3.6 per cent for 2016. Considering the funding squeeze and the general uncertainty for Greek businesses, such numbers are outright unattainable in the current environment.