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European Economic Crisis Persists as EU Questions Greek Commitment

A Greek five-cent euro coin depicting a tanker is seen amongst other coins in Athens, Greece, February 15, 2012.
A Greek five-cent euro coin depicting a tanker is seen amongst other coins in Athens, Greece, February 15, 2012.
Al Pessin

The European economic crisis shows no signs of abating, as several countries face downgrades in their credit ratings and some European leaders see the tough austerity measures adopted by Greece, in the face of huge protests, as being nonetheless inadequate.  

Thousands of Greeks, many of them prosperous and middle class until recently, crowded into the streets outside the parliament and clashed with police.

Inside, parliament members adopted a plan to cut additional billions of euros from the country’s budget.

Greece is in its fifth year of recession, with only more pain in sight. Its European Union partners are insisting on more details of the austerity program, and guarantees the plan will be implemented, before they will approve additional credit. Without more cash, Greece will default on debt payments next month.

A parliamentary election is scheduled for April, and some Greek politicians are saying enough is enough.

“After this difficult vote goes through, we would like to see our allies, our European allies show the respect that Greece needs, to show that Europe is here to really help and soothe the pain of the Greeks," said Olga Kefalogianni of the New Democracy Party.

At the Economist Intelligence Unit in London, analyst Martin Koehring said austerity is needed in Greece, but he acknowledged the cuts have had a severe impact.  

“The pace of this fiscal austerity is going too fast, even though the European leaders even say it’s not going fast enough. The message is that Greece will be on life-support for the foreseeable future,” said Koehring.

Koehring and other analysts say the wealthier European countries are ignoring the need for economic growth in Greece and the other troubled economies. They say that without growth, the countries will not be able to recover in the long term, and their people may well reject plans that promise years, or even decades, of suffering.

EU expert Thomas Fischer of the Bertelsmann Foundation said as much at a recent conference in Brussels.

“The focus has been on national austerity policies. The focus on growth and jobs is much weaker than the one on fiscal consolidation. That is our basic problem, I suppose, ” said Fischer.

The fallout of the European debt crisis has reached even to countries that are relatively healthy economically, including Britain. On Monday, credit rating agency Moody’s put a negative watch on Britain, putting its AAA rating in jeopardy. And the agency also simultaneously downgraded several other European countries.

Martin Keohring was not surprised.

"Probably Moody’s is right in highlighting that the situation for the U.K. is very dangerous. The general economic outlook is weak because the U.K. is very exposed to the euro zone,” said Keohring.

While anger in Greece boils over into the streets, European leaders face a dilemma. They need both austerity and growth at the same time, and experts say that is a difficult combination to achieve.

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