Greece is in economic meltdown, and the Greek government is on the brink of collapse after a series of pitched battles between police and demonstrators took place on the streets of Athens yesterday. The demonstrators were protesting against the government’s austerity measures, which were imposed to guarantee further bailout from the EU.

As a member of the Eurozone - that collection of countries who all share the euro currency - it is essential for zone’s success that the Greek government does not default on the repayment of its loans. However, one of causes to Greece’s near bankruptcy is its membership of the Eurozone. Without the euro, Greece was moderately successful. With the euro, it is bankrupt. The Eurozone is run for the benefit of its banks, not the people - as the citizens of Greece, Portugal, Ireland and Spain will tell you.

Membership of the Eurozone has very high fiscal standards - realistically you must be as successful a country as Germany to have any chance of maintaining a position with the Eurozone, which is unfeasible.

In an attempt to maintain some semblance of power, Greek Socialist Prime Minister, George Papandreou announced on national television yesterday, he would form a new government today, and ask for a vote of confidence, after negotiations to form a coalition with the Conservatives failed.

It was these events which saw world stocks tumble and EU leaders bicker over whether Greece should receive a further bailout. If the Greek banks implode, then this could “spread like contagion” bringing down major banks in Germany and France - an event which would be worse than the collapse of Lehman Brothers Bank in 2008.

The problem is Greece cannot afford to pay for any further bailouts, and the Greeks do not want it.

If Greece defaults on the loan (which it undoubtedly will), then this means that the banks who financed the bailout will be in serious shit.

And one of the big the knock-on effects if Greece falls is that America will have to foot the bill, as the U.S. is the major insurer of Greek loans.

While the EU ponder on how to bail the Greeks out, Papandreou may be best served by quitting the Eurozone and restoring the drachma - a difficult choice as there is no formalized way to leave the Eurozone, just like in that Eagles’ song, “Hotel California”:

“You can check-out any time you want, But you can never leave.”

The whole Eurozone was forged by trickery. It started with the fall of the Berlin Wall and the re-unification of East and West Germany, the French President, Francois Mitterand was concerned Germany would return to its old ways of European domination, and he discussed his fears with then British Prime Minister, Margaret Thatcher. The Iron Lady had her own concerns over German re-unification, and carried a map of Germany’s 1937 borders in her handbag, around which she traced her finger, noting the names of the towns and cities either side of the divide.

Thatcher was in favor of Germany’s gradual re-unification, well inasmuch as she knew it was inevitable, but thought such re-unification should take place over a period of 5 years. Her main concern was a belief Germany’s central position would lead to a “destabilizing rather than a stabilizing force in Europe.”

Mitterand had a similar view, and told Russian President Mikhail Gorbachev, “France by no means wants German reunification, although it realizes that in the end it is inevitable.”

This inevitability led Mitterand to use German re-unification as a lever by which he could ensure his vision of a single common European currency, the euro. He asked Thatcher to be more voluble in her concerns of Germany’s return, so he could force German Chancellor Helmut Kohl’s hand into accepting certain constraints, but in particular his agreement to and support for the euro. Kohl agreed. In 1990, Germany was reunited, and the foundation for a Eurozone began.

Since its official introduction in 1999, the Euro has been the focus of criticism both for and against. Those ‘for’ will tell you about freeing up trade, opening borders, price harmonization and lower inflation. Those ‘against ‘will tell you about high inflation, high unemployment, the loss of sovereign democratic power and the difficulty of imposing a single currency on such an unwieldy cluster of countries as seen in the Eurozone.

At the moment, the nay-sayers have an upperhand, as Greece, Ireland, and Portugal have been forced into a bail-out by the EU against the wishes of the people. In other words, these countries have maxed their credit cards, and rather than confiscating them, the banks offer brand credit cards with more and more credit at exorbitant interest rates. The reason given is that these countries are “too big to fail”.

Last month, Eurozone financial leaders unanimously approved a 78bn euro ($110bn) bail-out for Portugal.

The group, which has been meeting in Brussels, said the loan was to “safeguard financial stability in the euro area and the EU as a whole”.

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The IMF has also approved 1.58bn euros in new assistance to Ireland.

Portugal’s loan will be split three ways between the European Financial Stabilisation Mechanism (EFSM), the European Financial Stability Facility (EFSF), and the IMF. Each will contribute 26bn euros.

In return for the deal private bondholders have been instructed to maintain their exposure to Portuguese debt, rather than sell it off.

At the same time this was agreed, Eurozone Finance Ministers were discussing the situation in Greece, and whether the country will need further money to help deal with its debts.

The head of the eurozone group Jean-Claude Juncker said a “kind of reprofiling” of Greek debt had not been ruled out, but he eliminated the possibility of a “large restructuring”.

“Greece must still step up the implementation of its fiscal and structural reforms and start implementing the ambitious privatisation programme which is worth about 50 billion euros and do so without any further delay,” said Mr Juncker.

“This is very important part of reducing the debt burden of Greece as the 50 billion euros is equivalent to about 20 percent of the GDP of Greece.”

He added that the “Greek chapter” will be “definitively” concluded at a further meeting in June.

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Debt-strapped Greece was bailed out a year ago by the EU and IMF to the tune of 110bn euros ($157bn; £93bn) euros.
Since then it has imposed a series of financial cuts and austerity measures to try to balance its books.

On Friday, EU Economic and Monetary Affairs Commissioner Olli Rehn said Greece must take additional steps to consolidate public finances because it was missing its deficit reduction targets.

The country has a 327bn-euro debt - nearly 150% of its output.

Whatever happens next it is probably all too late for Greece, as its citizens want out from under the thrall of the Eurozone, its banks and all that they entail.

At present they have two choices: take on more debt they can’t afford and have their country run by Germany; or, quit the Eurozone

It is understandable why the latter may seem more attractive, and if Greece is successful in quitting the Eurozone, then others will follow.