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Dominique Strauss-Kahn was not present at the meeting

Yesterday’s meeting in Brussels of European Finance Ministers ended in a paradox, but the discussion must go on because Greece is a Balkan country and Balkan countries can cause disastrous problems. Serbia led to the start of World War I, and that began the twentieth century decline of Europe. In this case the unraveling of the Greek economy could lead to another financial crisis and further worldwide recession.

European countries are pressuring Greece to make budget reforms and raise cash by selling assets at the same time they debate billions more euros in loans. Greece will probably have to reschedule or reprofile loans, which means they will replace them with new bonds with longer maturities.

The $155 billion bailout from last year was not enough to get through 2012 without private lenders which of course they can’t get. Greece needs 60 billion euros in new loans for 2012-2013, but other countries now want collateral.

Teams of experts, including non-Greeks, have suggested more privitization programs. Greece is resisting politically. They don’t want to sell off bits and parts of their country for cash. Nor do they want to reduce the size of their government. Too many Greeks would lose their jobs.

Greece’s debt is now reaching 375 billion euros, which is 166% of their GDP. But if they restructure their debt three ominous things could happen:

1)Greek banks wouldn’t have sufficient capital

2)There would be no access to financing

3)The situation would spread to the other pigs — Portugal, Spain, Ireland, and Italy.

In an op-ed piece David Wessel suggests that the only solution is more foreign aid for Greece, not loans. Yet in the Northern Tier, in countries such as Germany, this is unpopular.

Germans must make the sacrifice. It will only increase the strength of their currency and their own economic muscle.

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