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The next crisis in Europe?

Tourists visit the ancient Acropolis hill in Athens on March 5, 2012. Even if Greece can overcome its current crisis, it is possible that other European economies could crumble.

Jeremy Hobson: It's deadline day -- again -- in Greece. The private investors who have lent money to the country have a matter of hours to decide if they'll take steep losses in order to keep Greece out of a messy default. If all goes well, we'll get past this hurdle in the European debt crisis -- but probably move on to another one.

Marketplace's Stephen Beard is here live with his crisis crystal ball from London. Good morning, Stephen.

Stephen Beard: Hello Jeremy.

Hobson: So if we pass this deadline today and these Greek bond holders agree to a debt swap, then tomorrow morning, everything's OK? Or what?

Beard: No. I mean, there will be a sigh of relief. It does look as if the Greeks will get the first chunk of the second bailout loan in time to avoid what you say is a messy default later this month. But is this the end of the crisis? No.

And here's the problem: the Greeks have to keep cutting their budget to reduce their deficit to qualify for more bailout money.

Gabriel Stein of Lombard Street Research says that with these budget cuts, Greece is locked into a downward spiral.

Gabriel Stein: The economy grows weaker -- or rather contracts more -- and that means to relative to the size of the economy, the budget deficit actually widens, rather than narrows. That means they can never catch up, they have to run twice as fast to stay in the same place.

And before the end of this year, he believes, the EU and the IMF will say to Greece: You're not meeting the bailout terms, you're not getting any more money. Then, he says, Greece will default and exit the eurozone -- followed perhaps by one or two other countries.

Hobson: And what about those others, Stephen? What about Italy and Spain and Portugal? Even if we get past this Greece deadline, are there problems there?

Beard: Portugal's the most at risk. If Portugal went, then certainly Spain and Italy might not be that far behind. The whole eurozone is creaking right now. For the first time, a major political leader -- in the Netherlands, of all places -- has called for his country to drop the euro. So, this remains a deeply troubled currency block.

Hobson: Marketplace's Stephen Beard in London, thanks Stephen.

Beard: OK Jeremy.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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