25 Mayıs 2012 Cuma

Can ripple effect be in Eurozone?

The Group of Eight meeting was held at Camp David retreat in Washington to find solution for the top issues with which the world has been confronted in recent years. The foremost issues include economic instability, food safety and lack of security in some countries.

Following the meeting G8 issued a declaration detailing their commitment to ensuring adequate energy and dealing with climate change; providing food security and nutrition in Africa; promoting democratic transitions in the Middle East; and supporting political transition in Syria.

Majority of the troubles are centering in Europe and the Middle East. Sovereign debt crisis has been occupying Eurozone for 1 to 2 years. With regard to this vital issue, heads of state and government have been lost their posts one by one in Europe. The country which is mostly staying on the agenda and emerging to the forefront because of economic instability is Greece. The country is going to the second election due to political parties could not achieve to form the government, because of any of them had not possessed enough seat in previous one.

The result of election, which will be repeated in June, will also determine destiny of Greece whether to remain in eurozone or exit. EU Commission president Jose Manuel Barosso in his speech at the G8 meeting said they had only A plan to keep Greece in the region with stipulation implementing austerity program of the EU.

G8 leaders also highlighted their wish for a strong and cohesive eurozone, global stability and recovery; the leaders insisted their point of view for remaining Greece in the eurozone while respecting its commitments. The anxiety is that if the country would departure from the eurozone, it would "result in widespread default on private sector as well as sovereign euro-denominated obligations.

Another concern due to economic turmoil in Greece has the potential ripple effect of that crisis on nations like Spain and Italy that are struggling with low growth and big debts.

Investors fear any refusal by Athens to impose deep spending cuts agreed under a bailout deal could result in the country quitting the bloc of 17 countries that use the euro.

After the elections in Greece, if the elected parties would achieve to form a government and then they would not want to carry out austerity plan of the EU, in that case Greece may exit the eurozone. This would trigger other exits in the eurozone region. These developments can also deepen the current economic crisis and activate a bigger one in Europe and the world.

Another top issue was Iran; they reiterated "grave concern" over Iran’s nuclear program and the need to ensure an adequate oil supply.

Tough sanctions on Iran are slated to take effect June 28, and a full embargo of Iranian oil by the European Union is set for July 1.

There is concern about whether a sufficient supply of oil and oil products from other countries will make up for a lack of Iranian oil.

A "peaceful resolution and a political transition is preferable" in Syria, this is the wish of the G8. But the situation in Syria involves tougher actions. 

Another top issue is Afghanistan that has been suffered for long years. A timetable to withdraw all of the alliance's combat troops from Afghanistan would be 2014.

There was agreement among the leaders to let North Korea face further isolation if it continues its pursuit of a nuclear program.

In conclusion, when the Greek government will not accept to carry out austerity plan, then ups and downs can be experienced in economies, besides less growths, increase in joblessness. At the same time sanction on Iranian crude oil would cause price-hikes. This development can also lead to instigate economic indicators in the negative side.