Greece about to default

greek acropolis Pictures, Images and Photos Greece is getting closer every day to defaulting on their debt. The entire world is watching and waiting for this inevitability to happen. Some investors and experts are actually saying that it would be good for the global economy if/when Greece defaults. Their reasoning is simple. If Europe allows Greece to default then it will be a sobering lesson for other troubled European economies like Ireland, Spain, Italy and others. There is some sense behind this notion.

Countries can sometimes lose perspective of their own finances. Especially for the EU, it is always in the back of the minds of European economies that if something goes bad, other EU members will come in and save them. This is a very bad way to think because it encourages bad management since the consequences are artificially mild. Perhaps if Greece, which is a small economy, defaults, the other EU members will get their act together. Right now, they are somewhat reluctant to do what is necessary to fix their balance sheets.

The European Union is having these default issues partly because they are more fragmented than the United States. The EU is not a single country like the U.S. Each member nation of the EU has its own central bank and finance ministry/treasury department. Each country does as they wish, yet they are still part of the European Union and most share the Euro currency. The U.S. on the other hand has one central bank (the Federal Reserve) and one treasury department for the entire country. This makes it easier to manage.

Regardless of why default is a serious possibility in some EU member nations, the fact is that Greece is very close to being the first to go through it. We will then see if those experts are right in saying that it will be a good thing for everyone else.