6 Jul '15     home | previous

Greece, 2015

In recent weeks regarding Greece's debt problem and economic depression there has been a lot of talk and little give. Yesterday the Greeks voted in a referendum against the austerity and reforms demanded by their government's European Union creditors. So now what? Greece negotiator, the finance minister, who favored the no vote, has resigned. He had called those negotiating for the creditors terrorists, and they didn't want to talk with him anymore. He says "I shall wear the creditors' loathing with pride." From Germany the terrorism charge is described as an insult, especially after billions of euros have been forwarded to Greece to help it in its crisis.

The Greeks got themselves into their mess. Their debt is so great that observers are projecting that even after 15 years of sustained strong growth the country would still face a level of debt that the International Monetary Fund deems unsustainable. The country's debt level is currently 175% and likely to go higher because of its depression. The Greeks need economic growth. Debt cancellation, or near cancellation through radical reduction, is a solution, but the debt holders, of course, don't want it. As with Argentina's debt crisis in the last decades of the 1900s, the creditors are destined to lose.

There has been mountains of talk about Greece giving up the euro and returning to its old currency, the drachma. Britain has its own currency and remains a member of the European Union, but no country has ever left the 19-member euro zone, established in 1999. Big money in Greece does not want to leave the euro. They foresee it as bad for business and a loss in the value of their cash. There is talk of many bankruptcies. Some describe giving up the euro as economic suicide for Greece, which is more hyperbole. Greece economy would begin to work for Greece on its terms. Imports would be more expensive, but people would be getting up in the morning to grow and sell food, medicines would be distributed, tourists would trickle back as would credit and banking eventually. As the Argentinian government did, a law might be created that prohibited an export of money. At any rate, international investors will be slow for awhile in putting their money into Greece.

Maybe the Greeks have learned about tax collecting and a balanced budget. The individualistic inclination to avoid taxes had implications that have come back to hurt the Greeks collectively and as individuals.

Copyright © 2016 by Frank E. Smitha. All rights reserved.