In fact, the first signs of Greece fiscal instability came almost six months ago. And only on April 11, Euro Area finance ministers approved an emergency aid mechanism for covered in debt Athens. Few days later Greece officially asked to activate the loan. Yet, even when it became clear that an emergency bailout should be realized without any hesitation, the German government decided to wait until May 9, when the important election would take place. As a result, financial institutions have become increasingly concerned and have asked for higher yields not only on Greek obligations but also on the bonds of other Euro Area members struggling with high fiscal deficits. To make things even worst, rating agencies downgraded Greek sovereign debt to junk status and significantly lowered the rating of Portugal, Ireland and Spain thus making their obligations even more expensive.
Some may argue if Greeks manage to put themselves in such a situation why other countries have to take the responsibility and provide financial help. However, although Greece its only 2.5% of Eurozone GDP and its debt its owned mostly by European banks we can't forget that its default can easy trigger a domino effect all over Europe. In fact, the insolvency of Greece or any other country may distress interbank lending and make banks reluctant to lend to each other thus creating wider crisis. That's what should have been in European leaders mind when they were trying to underestimate Greece fiscal disaster. Indeed, Greece's debt troubles have evolved into a serious threat that questions the main pillars of monetary union. So was it worth to wait so much time to solve the Greek issue? How the Euro Area can exist and be credible if it's not able to help its troubled members?