Paul Krugman, one of the most famous economists in the world, recently claimed in an interview with the BBC that Greece’s best option is to leave the Euro. Krugman stated, “Greece was seriously, seriously irresponsible even during the good years.” He compared Greece’s spending to those of the US and other European nations and claimed that the irresponsible spending was “not to the same extent.”

Krugman explained that the problem for Greece is that it cannot print its own money which gives it an “enormous vulnerability.” Therefore Greece has two options: accept the demands that Germany is imposing on them in regards to lending or to leave the Euro. Krugman declared, “Greece must and will leave the Euro.”

However, Krugman also points out that it is difficult for any Greek politician to say that Greece should leave. In fact, Krugman believes “whoever says, ‘that’s it’ will have ended his career.” According to Krugman, Greece leaving the Euro could happen in a couple of weeks depending on the outcome of the Greek elections. The other option is that the European banks will eventually refuse to lend to Greece which will force it to create its own currency again.

Ultimately Krugman claims that this is the most desirable thing for the Greeks and for everyone else in the Eurozone. He believes that the main ramification will be the fact that the Euro membership is reversible. The greatest worry is that there will be a run on the Spanish and Italian banks. However, as long as the European Central Bank is willing to supply the Euros for this run there should not be a major problem.

In another interview with the Independent, Krugman also went more in depth as to who should be blamed for the Eurozone crisis. Krugman believes that the Maastricht Treaty of 1992 is what originally caused this crisis because it led the way for the use of a single currency in Europe.

Michalis Sarris, chairman of the Cyprus Popular Bank also commented on the possibility of Greece leaving the Euro on 17 May 2012. Sarris claimed that Greece leaving the Euro was not “inevitable” but was a “clear possibility.”

 Ultimately Cyprus hopes that Greece will recover without leaving the Euro because many of its finances are tied up in Greek investments. Sarris reported that the Cyprus Popular Bank suffered a loss of about 2 billion Euro do to the financial crisis in Greece. Sarris is hopeful and remains positive that Greece will be able to find a way out of this crisis without having to leave the Euro.

Paul Krugman is winner of the Sveriges Riksbank Prize in Economic Sciences (informally the Nobel Prize in Economics), Princeton professor, and a columnist/blogger for the New York Times. His books include End This Depression Now! and The Return of Depression Economics and the Crisis of 2008.

Image Courtesy of  Portokalis / Shutterstock.com

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On Saturday November 12 at 9.42 pm CET Italian Prime Minister Silvio Berlusconi has officially resigned.

His resignation arrived just few hours after the Italian parliament’s lower house passed an austerity measures package demanded by European Union and ECB in order to restore confidence in Italy’s economy and face the country’s heavy debt crisis.

Over 17 years, Berlusconi has always been the main character of the political scene in Italy, he was elected four times as prime minister – in 1994, 2001, 2005, and 2008 – and survived to more than 20 trials and accusations, several votes of confidence, sex scandals and conflict of interest.

After failing to win a parliamentary majority on a budget vote four days ago – for the first time since his election in 2008 – , he announced he would have left office right after the passage of the austerity package demanded by EU.

While the political events were getting hotter day by day, the economic crisis of the country kept on worsening especially because of the strong financial speculation of the markets.

Hence, in such a difficult and hard situation Berlusconi seemed to have no choice and had to surrender and eventually step down.

The news of his future resignation was welcomed by all the opposition parties, one part of his government coalition and a large portion of economics and politics experts and specialists.

Today after the austerity package was approved by the parliament lower chamber with 380 votes and the Republic President signed the legislation in the afternoon, the crucial moment arrived.

The official meeting to hand in his resignation to Republic President Giorgio Napolitano was set for 8.30 pm CET but Berlusconi arrived notably late.

Many people gathered in Rome, out of the presidential palace, to witness the last minutes of Berlusconi as prime minister and celebrate his resignation. At his arrival at the crowds started shouting “Buffoon!”, “Shame!”, and “Get out!”.

For about 40 minutes all the country waited for the official news. Journalists from all around the world were there and the attention of the media was totally drawn on this extraordinary event. November 12 was called the “freedom day” by the crowds gathered in Rome as by many people on social network sites happy to see him leaving the scene.

When the news of Berlusconi resignation broke at 9.42 pm CET, the crowds erupted in cheers, waving Italian and European flags, singing, dancing, jumping for joy. Resistance period songs were struck, bottle of champagne open to toast, and also the Handel’s Hallelujah was performed by chorus of professional and non-professional singers and classical musicians.

Silvio Berlusconi stated he won’t run for next elections but he will keep on contributing and collaborating with his political party. He also wants to participate in the new transition government foundation putting members of his party as candidates.

The new government, which will be led by Mario Monti former European commissioner, will be probably made up of technocrats and economics experts who will have to deal with the heavy economic crisis and the huge debt of the country. Tomorrow Sunday 13, Republic President Giorgio Napolitano will announce the complete government coalition.

The resignation of Berlusconi is seen as the end of an era and a new start for Italy and its political scene but the scenario is still unclear and confused. Next weeks and months will tell us what will be the future of a country that is on the brink of precipice.

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