Opinion

Hugo Dixon

Greece needs to go to the brink

By Hugo Dixon
May 28, 2012

Greece needs to go to the brink. Only then will the people back a government that can pursue the tough programme needed to turn the country around. To get to that point, bailout cash for both the government and the banks probably has to be turned off.

It might be thought that the country is already on the edge of the abyss. This month’s election savaged the two traditional ruling parties which were backing the bailout plan that is keeping the country afloat. Extremists of both right and left gained strength – voters liked their opposition to the plan. But nobody could form a government. Hence, there will be a second election on June 17.

Will this second election express the Greeks’ desire clearly: stick with the programme and stay in the euro; or tear up the plan and bring back the drachma? That is how Greece’s financial backers in the rest of the euro zone, such as Germany, are trying to frame the debate. But the electorate doesn’t yet see the choice as that stark. Roughly three quarters want to stay with the euro but two thirds don’t want the reform-plus-austerity programme.

The next election is unlikely to resolve this inconsistency – or at least that is the conclusion I came to from a trip to Athens last week. The battle for first place is between Alexis Tsipras, the young leader of the radical left SYRIZA party, and the centre-right New Democracy party led by Antonis Samaras.

A victory for Samaras might seem to offer the hope that Greece will stick with the programme and the euro. He has, after all, campaigned for both. However, even if he comes first – which he did in this month’s election – he will not have a parliamentary majority. He will either have to stitch together a majority coalition or govern a minority government. Neither is the recipe for a strong government.

A Samaras government could theoretically deliver a positive shock by moving full-steam ahead on reforms and gaining so much credibility with Greece’s euro zone partners that they give Athens real help in turning around the country. But it is far more likely that he will be timid and the rest of the euro zone will throw Greece only a few crumbs. The economy, which has gone from bad to worse in the last couple of months of electioneering paralysis, would continue its nosedive, Samaras’ popularity would evaporate and after a few months his government would collapse.

A victory by Tsipras in next month’s election might seem even worse. After all, he will probably set Athens on a collision course with the rest of the euro zone. Last week Tsipras likened the relationship between Greece and the euro zone to that between Russia and America in the Cold War, when both had nuclear weapons that could destroy the other but refrained from firing them. Tsipras thinks the rest of the euro zone is scared that Greece’s return to the drachma would cause the entire single currency to unravel and that the bail out of Athens will continue, even without substantial economic reform.

The impact on the euro zone of Greece’s expulsion would undoubtedly be severe. But the other countries are finally preparing contingency plans to mitigate the damage. Germany, for one, will not be blackmailed by threats of mutually assured destruction.

It is conceivable that Tsipras will blink first, if he wins the election and finds he can’t shift the Germans. But this is unlikely. The typical weasel words of a politician won’t be enough to get him out of a tight spot; he would have to perform a complete somersault. It is doubtful the Marxists in his party would let him get away with this and, if they did, he would certainly lose all credibility in the country.

That said, a victory for Tsipras may paradoxically be Greece’s best chance of staying in the euro because it would bring things to a head rapidly. The country is being kept alive by a dual life-support system: the euro zone and IMF are channelling cash to the government, while the European Central Bank is authorising cash transfers to the banks. If the first tap is turned off, the government will not be able to pay salaries and pensions from July. If the second tap is turned off, the banks could run out of cash within days.

Cutting off Greece’s life support could be the trigger for reintroducing the drachma as the people found the cash machines ran dry. But it could also finally force the people to decide whether they were prepared to back reform – provided the euro zone simultaneously rolled out a proper plan to help the country. A key element of that would have to be to take over the Greek banks and guarantee their deposits, putting the country into a form of financial protectorate.

In such a scenario, a Tsipras government would probably collapse. After all, even if he comes first in the next election, he will not have a majority and so would be relying on coalition partners or governing in a minority. Greece would then need a third election, after which it might be able to put together a national unity government – perhaps even led by Lucas Papademos, the technocrat who ran the country for the last six months.

It is a slim chance full of risks, but probably Greece’s best chance of avoiding the drachma.

Comments
46 comments so far | RSS Comments RSS

A very pertinent analysis.
Yet, people in Greece don’t see it the same way. And that’s a problem both for Europe and Greece. Germany and other European leaders proved slow and lacking leadership. Distributing the fault between Greek governments and people and the banks and governments that lent them so much money over time is tricky at best.
Asking the Greeks to accept austerity is one issue. Determining an austerity policy that makes sense is a completely different one. Can someone show me an austerity program that really worked and resulted in economic growth?
Cutting off Greece’s life support one way or another is a very dangerous gamble the Germans are playing. The contingency plans are, IMHO far fetched and dangerous at best. Nobody knows how they will work. And nobody tested an exit like this. How about the other European banks in Spain, Portugal, Italy and even France? And how about the CDS’s and exposure of the American banks.

I wonder why isn’t it easier to deal with 400 billions of Greek debt than to bail-out Spain with 1000? Greece IMO is over-inflated. And is all the creation of the slow moving, slow thinking European leaders. Or is it simple pride and stubbornness?

Posted by sodahead | Report as abusive
 

Here in Athens, I have sensed that Greece is already on the brink and has been for the past year (at least). People have been suffering greatly due to the austerity measures and I think they won’t back a gov’t which will agree to austerity measures….

http://themanyfacesofnewathens.blogspot. com

Posted by matia14 | Report as abusive
 

Sir, Greece need to drop out of the Euro and go back to the Drachma. I have lived and worked in both Germany and, until 2008, in Greece these two countries have very different economies, forcing them into the same economic mould will only result in the impoverishment of both. This whole problem has been caused by the banking system who, it seem, must be saved at all cost. Greece has in the last 100 years defaulted 50% of the time. Investors have lent money backed by “credit default swaps” under written by European banks and others. The shear stupidity beggars belief, would you lend money to someone in your office who only pays you back half the time?. People have accused the Greek people of corruption, and in many ways this is true (I have lived and run a business there), however would you say that the Irish people are corrupt? No the answer is a root and branch reform of the banking system and making scams like high frequency trading, hypothecation to infinity illegal, until this is done what ever happens to Greece will happen to us here next. The day Greece drops out and devalues is the day I book my next holiday, it’s a fabulous country the people are great it just got too expensive. It isn’t Greece that needs to go to the brink it’s the financial markets and the banking system, and I suspect that, that it won’t be long coming now. The other group who need to look into the abyss are the European leaders who have ignored the democratic the will of the people and like religious zealots and have imposed a united states of Europe onto us. We in this country voted for a free trade area where people could come and go across borders and I suspect that, if asked, that’s what most people would vote for today.

Posted by raysilver2 | Report as abusive
 

You state “Greece needs to go to the brink. Only then will the people back a government that can pursue the tough programme needed to turn the country around. To get to that point, bailout cash for both the government and the banks probably has to be turned off.”

What, exactly, do you mean by “tough program to turn the country around”?

People keep tossing terms around, which in reality are little more than sound bites, but no one has yet specifically defined what that means.

Frankly, it strains credulity to believe “austerity” would EVER bring about growth in ANY nation.

Perhaps you people know some secret about economics that I don’t. If you do I would really like you to share it with me.

What it sounds more like is you want to treat Greece like a spoiled brat who needs “tough love” to straighten him out.

Do ANY of you people understand what you are doing, or demanding of Greece?

Posted by PseudoTurtle | Report as abusive
 

@PseudoTurtle, “What it sounds more like is you want to treat Greece like a spoiled brat who needs “tough love” to straighten him out”
Do you have a problem with “tough love”? I don’t!
A failure to report income. overpaid govt and union workers, and living like there is no tomorrow is what got them into their pickle do you think more money and avoidance of these key realities will inspire any change in their behavior?

Posted by Ed57 | Report as abusive
 

Regarding my comment above, you state “Cutting off Greece’s life support could be the trigger for reintroducing the drachma as the people found the cash machines ran dry. But it could also finally force the people to decide whether they were prepared to back reform”

What does “reform” in this context mean in specific terms. Clearly, right now the Greek government does not have the ability to reform itself within the constraints and demands of the EU. How, specifically, would you accomplish this?

And you state “A key element of that would have to be to take over the Greek banks and guarantee their deposits, putting the country into a form of financial protectorate.”

At this point, what are the odds that the EU would be willing to take over Greece as a “financial protectorate”? What does that really mean? The EU would become totally responsible for all Greek debt? Does Greece cease to exist as a sovereign nation?

If they can’t do what is demanded, would the EU invade the country and seize its assets?

From what I can see, there is no hint of reasonableness in substance or feasibility to what is being discussed regarding Greece.

Perhaps someone can lay out a scenario that is feasible for the Greek people and would satisfy the demands of the EU, but if one exists, I certainly do not understand what that might be at this point.

All I see is a lot of bullying and braggadocio about what Greece must do, or else.

You are, in effect, guaranteeing a “Grexit” will happen quite soon.

If so, the Greek people will be better off.

Posted by PseudoTurtle | Report as abusive
 

@ Ed57 –

Thanks, you’re exactly the person I was waiting, since you apparently know the answer to that which I do not understand.

How, EXACTLY, would you reform Greek behavior in terms of “A failure to report income. overpaid govt and union workers, and living like there is no tomorrow”

Given that Greece is a sovereign nation, not a spoiled brat, how would you fix all their problems?

Posted by PseudoTurtle | Report as abusive
 

After reading this article, I suggest you read the following article, which realistically describes the situation.

http://www.reuters.com/article/2012/05/2 8/us-eurozone-doomsayers-idUSBRE84R0JM20 120528

Posted by PseudoTurtle | Report as abusive
 

There will be no short term solution to Greece’s problems. In fact, a balanced Greek budget ten years from now is probably wishful thinking. The issue that must be decided is whether or not the eurozone is willing to subsidize Greece for the foreseeable future. If the answer is no, we will get to see all the hidden financial entanglements that are part of the eurozone banking system. Clearly there is a huge risk in a “Grexit”. If there was not, it would have happened by now. The irony is that Greece is much of the “developed” world in microcosm including the US. They may well be our window on the future.

Posted by gordo53 | Report as abusive
 

I hope that the views expressed here are just personal, and not of Reuters, because if they are not and they represent a kind of planning they are extremely dangerous and may backfire badly.

Posted by aliboss | Report as abusive
 

IMF Lagarde’s interview with the Guardian was the best result so far

No change in the bail-out conditions

Pay your taxes

If you can’t, then there are more deserving countries that IMF need help

Posted by scythe | Report as abusive
 

Fair enough, PseudoTurtle. A decent point. Perhaps you are also happy to shear with us, how is Greece going to change its ways without “touch love”. That certainly is a mystery to many.

Posted by no2co2 | Report as abusive
 

@gordo53: well spoken, there is a big danger that Greece is the harbinger of what will happen in other countries that live beyond their means.

Nevertheless it would be the best economic solution if Greece left the Euro. They obviously cannot make it work, and with their attitude never will. The comparison with a spoilt brat isn’t that far off the mark, though the average man on the street is to blame to a lesser extent than their country’s “management”.

Having visited Greece numerous times in the past it s quite obvious that there is limited notion of limiting spending to what one can afford. On the other hand, it also quite frustrating to see – as a native German – how many folks complain about their deteriorating life style, and put the blame on anybody else but themselves.

It is all too easy to forget that the relatively strong position of the German economy is largely owed to the fact that the country has gone through its own decade long austerity. “1 Euro jobs”, negligible salary increases over years, the slashing of the social security (in some cases to the bare bones) and culling of community services at state level have all contributed to reign in some of the excesses. Still the budgets are not balanced and undoubtedly there is a lot of slack.

During the same period Greece has received about $60,000 per head in subsidies.

When does the spoilt brat gets his house in order and starts facing up to the things that need doing?

Posted by RealMrBean | Report as abusive
 

@PseudoTurtle – as you point out, Greece is a sovereign nation and they themselves will have to decide to change. It should be pretty obvious by now that they would rather not change their ways. For them to make this tough decision, they need to be pushed to the brink. This is really pretty simple. They have to realize that government does not “make” money which can freely share with its citizens, but instead, citizens themselves need to finance the works of the government. There is nothing that will drive this message home more effectively than when money dries up, and government checks stop coming in…

Posted by dadodudo | Report as abusive
 

Best & funniest output would be having Greece out of the Euro, and discovering that everything goes along just fine for the Greek people. Discovering that there is life after the Euro would make every attempt to implement austerity on south European countries much more difficult. After all everybody knows that the problem is the overvalued currency, and not the lifestyle habits of the people.

Posted by the_italian_guy | Report as abusive
 

its pretty simple- the Greeks have to stop spending other people’s money- the German tax payer has clearly had enough. And, it is not hard to understand why: If you were a hard working German, would you want to subsidize the dysfunctional Greek welfare state? The interesting extension of this that seems to be lost on many Americans is that this is the logical predicament for governments (like ours) that overspend and stifle the free market with excessive regulation.

Posted by USA4 | Report as abusive
 

Dear Mr. Hugo Dixon, & All Posters here,

You are all blaming & prescribing medications for the very ill Greek economy & state of affairs. All useless & irrelevant. None of you are questioning the root CAUSES for this ‘Catastrophe’, now playing and/or soon to be played at a theater near you.

Simply put, this is a Wall Street Financial Ponzi Scheme, no different from Ponzi schemes perpetrated world wide.

Here are the Facts:

Unqualified Greece entered the Euro Zone in 2001 ONLY by having Goldman Sachs manipulate its books so as to qualify. GS has been making hundreds of millions in commissions. The EU Elite & Banksters were aware of this and welcomed the new ‘ raid opportunity ‘.

Greece’s shipping magnates & elite do not have to pay taxes, it is guaranteed in their crony Greek Constitution (not very different than our crony US Congress).

More than 80% of Greek industries & businesses are EU & foreign owned & controlled and their profits are deposited in EU & foreign banks outside Greece. They also pay little or no taxes, instead, they are bribing Greek government officials & others. This alone would be sufficient enough to deplete their economy to zero within a few years.

Greek citizens, unlike those in most other EU countries, aware of this de facto scheme are not very willing to pay their share of taxes either, and you can’t blame them.

It is in the interest of the stronger EU members to have weaker EU members for economic exploitation, and it is the same short-term greedy profit ripping philosophy as in any Wall Street.

Now the EU Elite & other Banksters are trying to bleed the Greek people out of their last drop of blood through the imposed ‘ Austerity Measures ‘ for even more profit. GOOD LUCK !

Whether Greece stays with the Euro or not is irrelevant, the damage has been done.
If it retains the Euro for now it will still have to exit within a year. The Greek economy in its present condition and guaranteed continuing deterioration is just not compatible with the EU economy.

Greeks by nature, when not fighting a common enemy, will argue to death & fight with each other, never agreeing on anything that might bring stability and progress to their country. So a legitimate & honest Greek government is a far away illusion.

Posted by GMavros | Report as abusive
 

A short, but poignant conversation between two friends.

Dumbman: Sir, why is the Euro & the EU in such big trouble today ?



Wiseman: You see Dumbman, in order for the industrialized & 
wealthier EU countries to sell their goods to the poor neighboring 
countries and therefore finance their own economies, they needed a 
way to get cash into those unproductive & lazy neighbors of theirs, 
like lending them some.



Dumbman: That makes sense Sir, lend these poor people some money 
now to buy things & services they cannot afford and have them pay 
back at a later time when they will have the money.



Wiseman: You are very bright Dumbman, and they did lend them lots 
of money and with very hefty interest rates. Investors from all 
over the world poured their money into these poor countries 
expecting astronomical returns on their investment while their 
brokers also made huge commissions. Everybody was very happy.


Dumbman: So what is the big problem now, Sir ?



Wiseman: Well Dumbman, the poor countries never got to earn and 
save that ‘ future money’ they were supposed to pay back those huge 
loans & hefty interests with, and the lenders are not lending them 
any more. So now some countries are going bankrupt and that is not 
good for all those anxious investors and it also threatens the 
very survival of the Euro & the EU.



Dumbman: And why is that, Sir ?



Wiseman: Well Dumbman, apparently the lenders & the borrowers each 
had their own illusions on this arrangement. The poor countries 
never got to invest their borrowed money productively. They spent 
it living the good life and most of it was put into a few private 
elite pockets, stolen.
Also for the wealthier lenders it would not be in their interest to 
allow economically stronger neighbors and create more competition 
for their own economies. Stronger animals thrive & feed on weaker 
animals.



Dumbman: Sir, this is getting a bit beyond me, could you explain it 
in simpler terms.



Wiseman: Well Dumbman, the strong lenders foolishly expected their 
unqualified weak borrowers to pay back very expensive & 
unaffordable loans, and the weak borrowers foolishly expected an 
unlimited supply of the same very expensive & unaffordable loans. 
Now the party is over and the participants are sobering up into the 
reality of an economic catastrophe.



Dumbman: I get it now Sir, but why would people do such foolish things

Wiseman: Simple, it is known as ‘ Greed ‘ throughout history.


Posted by GMavros | Report as abusive
 

I think Greece can stay in euro without printing drachma.
Government will first impose controls of money flows and will pay public sector according to the amoun of euros it will have.

That will immediately bring economy in balance.

Going to drachma is counterproductive as it will have very little value in euro.

Posted by wirk | Report as abusive
 

Yeah, I have the sense this next election won’t succeed either. And I didn’t even have to go to Athens to figure that out. With the leading party New Democracy polling far less than a majority and Tsipras’ party polling a not-too-distant second, I don’t see any party being able to form the required coalition. That means Greece won’t enact the reforms needed for the June tranch of bailout funds. Unless the EZ blinks, Greece will begin defaulting on its obligations very soon.

Posted by RobinInSanDiego | Report as abusive
 

If only it was that simple. Unfortunately, this, rather naive I fear, understanding of the situation in Greece and of Greece, can only allow for theoretical debates but has little grounding on reality.

Greeks naturally want to stay in the euro. Also naturally they don’t want the austerity programme because after two years already they see NO IMPROVEMENT and, most importantly, NO PROSPECT OF IMPROVEMENT.

Greeks, for the most part, do not ignore the domestic reasons which led us to this dramatic situation, quite the contrary. Nor are they unwilling to support reforms, PROVIDED THEY HAVE ANY CHANCES OF GETTING IMPLEMENTED AND IMPROVING THE CURRENT DIRE SITUATION. What they have run out of is the hope that this will happen. Structural reforms are announced but never implemented by the totally ineffective political elite and the vastly incompetent and entirely demoralized public administration. The simplest of systems to tackle tax evasion have been repeatedly paid for but never implemented. As a result the only remaining revenue-generating solution of raising taxes has reached its limit (the tax-paying capacity of LAW-ABIDING Greeks has long been exhausted, while the widely known tax evaders continue to owe vast amounts of money to the state, with no prospect of collecting even parts of them). And the list can go on almost indefinitely.

So when you write that “[c]utting off Greece’s life support [could] finally force the people to decide whether they were prepared to back reform” you fail to see the elephant in the room. The dilemma is not whether to back reform or not. The question is whether ANYONE IS CAPABLE OF DELIVERING THESE REFORMS. Not announcing them, not creating the legal framework for them but actually delivering them. NONE of the traditional parties has proven to be up to the task. In other words if one thinks that a pro-bailout plan government, even with a strong mandate (which seems unlikely), would offer a way out of this mess, one would be GREATLY mistaken.

Nor is SYRIZA’s proposal for a ‘global mutiny’ any more serious of course. Many Greeks are afraid of SYRIZA being in government. I know I certainly am, especially since the lack of coherence, consistency and touch with reality in their agenda have become apparent. The irresponsible, panic-creating and often mutually-exclusive statements by several members of SYRIZA have only made matters even worse, threatened to create a ‘bank-jog’ and make the already frail bank system collapse.

The voter’s dilemma now is to choose between parties that promise changes they evidently cannot succeed in making and parties (namely SYRIZA) advocating national suicide. This, without a doubt, is a dilemma with no obvious answer. And it has almost nothing to do with backing or not much-needed and long-overdue reforms.

Even your comment about Papademos seems to forget that Papademos had a clear and very limited mandate by the political leaders who backed his government. Can you imagine how difficult it would be for a national unity government to have a similar mandate, agreed upon by leaders with so vastly different agendas? How much crucial initiative would such a government be able to take outside the limits of a limited common denominator? Such a government would be able to offer a solution to the problem of the incompetence of the political elite, but it would probably be deprived of the much-needed political legitimacy and capital for such reforms to be effective.

Much as I would love to see a solution depending only on the voters’ ‘wise’ choice, there are no easy paths available.

Posted by ttzanetti | Report as abusive
 

@ttzaneti writes: Also naturally they don’t want the austerity programme because after two years already they see NO IMPROVEMENT and, most importantly, NO PROSPECT OF IMPROVEMENT.

This is illustrating very well how far are Greeks from reality and still living in delusion. There should be improvement in TWO years??? Come on, people get life. If there would be no support from euroland Greece would be already bankrupt. In consequence the buying power would be reduced by 3/4. To see improvement after this would require at least 5 years if not 10. But even after the 5 or 10 ys Greece obvioulsy would not recover to the level before the crisis. Let’s face it, the real economy of Greece is not far from the Balkans and thus the conditions can not be much different.

Posted by wirk | Report as abusive
 

Greece simply needs to become a tougher business entity.
Bargain hard for a 10 cents on the dollar for debt forgiveness and threaten bankruptcy as the only alternative.

Banks will have to take it – plain and simple.

Why would a Greek government put their citizen onto the austerity scam for decades to come for crappy risk review bank loans? This is treason.

Posted by Butch_from_PA | Report as abusive
 

The drachma solution is illusory, a way of hiding the correction of labor and product prices. Take the correction in Euros. You first of course.

Posted by JimTheDiver | Report as abusive
 

This article is, without doubt, the worst piece of garbage I have read in a very long time.
The writer is proposing to willfully take steps to make a situation unbearable so that “they” can implement “their” own glorious plan (because apparently “they” magically know exactly what needs to happen) to turn things around.
I absolutely pity anyone stupid enough to think this makes any sense whatsoever. It is beyond ridiculous.
The writer never mentions once who he wants the situation to become unbearable for. The innocent Greek lower class trying to get by day to day? The innocent Greek middle class? The innocent Greek upper class? The members of the Greek government trying to hold on to power? The other members of the Eurozone trying to avoid turmoil? The purchasers of Greek bonds trying to avoid more haircuts? The US government? The Wall St banks (who cannot believe their luck that European banks where stupid enough to buy their carefully crafted CDOs and CDSs which caused so much chaos in Europe that it started making the basket case which is the US dollar look like a safe investment)?
I have to laugh when commentators accuse Greek citizens in general of being lazy and living beyond their means.
If there’s one thing I know about humans, it’s they always take what they believe to be the best option available to them at the time. Obviously people with different experiences and education levels make different choices. If you all were born in bred in Greece no doubt you’d be in the same boat as them. Try to keep that in mind when judging people so harshly.

Posted by RandomName2nd | Report as abusive
 

Reading through these comments, i can’t help but wonder what is meant by “living the good life” on a country which is way behind on economic development and still trying to compete with the same currency and on the same economic zone as the big economies. If someone could explain what “living the good life” to the average joe on the street means, please, explain it using really simple words.

Also, IMHO, what has failed in Greece and the other countries here is not intrinsic to those countries but rather the capitalist system. Those countries didn’t go to bed one night without problems and the other day the rating agencies realized what a bit problem they were. Those are the same agencies that so dilligently warned everyone of the banking system collapse, or rather didn’t. They are obviously trustworthy.

The greek worker worked on average TWICE the amount of hours the german worker did last year. Thats a good life right there.

I live in a country under assistance. In Portugal. I have never had a bank loan nor did i ever failed to pay my taxes or tried to evade them. I have no debts to anyone or anything. Yet i somehow “lived the good life” and must now have pay cuts and work more hours for less money. More good life.

It’s not the people who are the problem. Its not event he country. How can someone in their reasonable minds conceive some kind of collective blame on the people of a nation and yet fail to realize that short sells, stock tradings, futures, are the real cause of the problem?

Want a better solution to this whole crisis? Here’s one. Make it illegal for anyone or any institution anywhere collect interest over money. Make money lending a state function, paid only the same amount owed. States don’t need profit, they need to serve the people’s need. If the economy needs money to function, the states provide that backing – Oh no, its socialism – no, its not. The states are already backing all money lending nowadays. The problem is simply the interests charged. Take out the interests, and the problem goes away. No more inflation anymore. No more constant need for growth. The downside? Greedy bastards that have never worked a day in their lives would not make fortunes by ruining other people anymore.

I for one could EASILY live with that.

Posted by joaocorreia | Report as abusive
 

Greece is doomed. The Greeks cannot accept the fact that their lifestyle was put on a credit card and the bill has arrived.

Posted by Texas_BlueBlood | Report as abusive
 

What a silly editorial. Sorry Hugo, its over. The EU is already preparing for Greece’s default. Its not a hypothetical exercise. They’re not just expecting Greece to leave the EU, they know its the only way. Of course, it will cost European banks billions. But backing up the banks with billions is money better spent than to provide another bridge to Greece which ultimately won’t change without having exited the EU altogether. Greece needs to flounder outside the EU to provide an example to all the weaker EU members. Greece will float their own currency which will shortly challenge Kimberly Clark’s market share for toilet paper in Europe. No one will lend Greece a dime and the country will be in disarray for a generation. This is the tough love it will take for a paradigm change of Greek attitudes regarding entitlements.

Posted by DrDuude | Report as abusive
 

Where does the bailout money go anyway? It does not reach the average Greek on the street. They might as well go back to the Drachma and cut their losses. Otherwise every bit of real estate and all of their natural resources will be confiscated by the lenders, i.e., loan sharks.

Posted by billybob1 | Report as abusive
 

Where does the bailout money go anyway? It does not reach the average Greek on the street. They might as well go back to the Drachma and cut their losses. Otherwise every bit of real estate and all of their natural resources will be confiscated by the lenders, i.e., loan sharks.

Posted by billybob1 | Report as abusive
 

what about the US debt? and japan debt?

Posted by wootwang | Report as abusive
 

I strongly support this plan. I would also support the same plan for the state of California. NOT ONE DOLLAR OF US TAXPAYER MONEY SHOULD GO TO CALIFORNIA!!!!

If California gets money from the Federal Government the country is doomed to become the nanny for the entire country and more states will be shown that they can spend money that they do not have, cannot be paid back and the Feds will come to the rescue. The result will be more financial mismanagement by irresponsible state politicians with the US taxpayer being the loser.

Posted by sickofitinca | Report as abusive
 

sodahead said “Can someone show me an austerity program that really worked and resulted in economic growth?”

Sure. How about Ohio and Wisconsin? those are two, but there are more if you bother to look around. Scott Walker that is undergoing a recall put in place austerity measures to fix the 3 billion dollar deficit that the state hd., They did the reforms and the state now has a surplus, 20,000 more jobs and their economy is growing.

Posted by sickofitinca | Report as abusive
 

Let the crazies in Greece win and take the country back to the drachma. The Greek people are insisting on unreality, insisting that other people pay for their benefits. Let the Greek people experience the consequences of their own irrationality. So far they are counting on the Germans, like Atlas, to continue to hold up their world even while they heap abuse and attacks on the Germans. The German Atlas should shrug.

Posted by pcsyah183 | Report as abusive
 

Greeks do not see the crisis as the result of their mismanagement of the money and tax evasion, but as a direct consequence of the austerity measures. They just can not accept to pay their debts. They are playing the same game – they made their problem a problem of the whole Union and would rather ruin EU than to start working and saving money. Learn from Lithuania and how they deal with their crisis 2 years ago – and nobody was crying on the street.

Posted by arhitekt | Report as abusive
 

If Greece returns to the drachma, the euro will continue to be the real currency of all meaningful commence — what people used to call “hard currency.” When I visited Greece many years ago as a kid, everybody had their private stash of hard currency (mostly dollars, by also DM), and pulled their wad of bills out of their pocket anytime they had to buy anything of importance. This time it will be the euro. Everyone will continue to do trade and business in euros, except it will be either cash or payments through non-Greek banks. We may even see some kind of officially imposed exchange rate, and therefore a universal black market at market rates — because the drachma is certain to be nearly worthless to anyone outside the Greek economy.

It will be like the Prohibition of alcohol in the US in the 1920′s, only more extreme. Half of the economy will move off the books — half of the small percentage that’s already on the books in Greece. You can bring back the drachma, but you can’t leave the reality that people need a currency that is valued for reasons greater that mere government fiat as legal tender. Money has value only to the extent that you can use it.

Posted by From_California | Report as abusive
 

What is happening in Greece is the harbinger of what will happen in other countries. You simply cannot keep spending money you do not have. It doesn’t matter what the money is for, you can’t spend more than you have unless you never plan on paying it back. (with interest) What in the world is so difficult to understand. All these discussions use big words and economic terms but……you cannot spend more than you have otherwise Greece Happens.

Posted by Levendi | Report as abusive
 

Looking at the EU tidy group of countries, the list makes sense until you get to the southern most countries and then it’s hard to make sense of the deal. Other than the tiny sparsely populated Iceland and Ireland, having Spain, Portugal, and Italy joined at the hip with Germany and the UK, is like a Park Avenue socialite getting hitched to an uneducated Romanian farmer. Mr Hitler learned the hard way that the Italians aren’t all that committed to anything and given enough time their laid back attitudes will cause them to quit and walk away. I don’t know that productivity in Greece, Spain and Portugal is much different. To see one after the other squealing “Germany we need your money” is getting very old. What do Germany and Greece have in common? Can anyone be shocked that locked into an EU the stronger economies are going to be sucked dry by the weaker third world-ish partners?

Posted by ParkerWest | Report as abusive
 

Europe has always seemed to me, to “talk right and walk left” especially when it comes to all this mess. As someone once said, “But this time it’s different.” Just saying… (Texas)

Posted by WouldChuk | Report as abusive
 

Too many people are worrying about Greece, when they should be concerned about Latveria, and the madman who controls that country.

Posted by trippstertripp | Report as abusive
 

If austerity is unexceptable, bankrupcy and starvation is inevitable.
If you can’t stop the bleeding the patient is simply going to die, so be it.

Posted by Maxwells | Report as abusive
 

Why would he want to “avoid going back to the Drachma”? Defaulting on Euro debt, and returning to the Drachma will increase the Greek standard of living, in the long run, because debt won’t be repaid. Without the debt, the Greek balance of payments would be balanced. It is true that the government, there, does not take in enough revenue, but with tax reforms and efforts at better collection, that could be solved. Under a new Drachma, assuming a temporary deep devaluation, the tourist industry would boom, exports would soar. Everything would balance out within a year. Everyone in Europe would be much better off, except for the banks and their creature, which is the ECB.

Posted by John.Maynard | Report as abusive
 

Please, take a moment to reflect that what is happening is not a mere financial exercise in paper. It affects and destroys human lives. I agree that children of Niger need more sympathy than Greek/Portuguese/Irish/Spanish or Italian children, but it is unethical to frame it as an either/or situation, you don’t have to shoot the one child to save the other.
Of course if you consider the fact, that although modern technology can provide food and water for all humans, yet more than 2 billion people don’t have access to food or water, then something is seriously wrong on this planet.

In ancient Greece, when a man defaulted on his debts became slave to his debtors; a prudent clause to prevent someone from taking on too much debt. But as anyone who has played Monopoly in his youth knows, sooner or later wealth eventually tends to accumulate. In 6th century BC, the situation was roughly the same; debt had skyrocketed and too many people were enslaved. Solon, the Athenian lawmaker, one of the seven wise men of his time, proposed the Seisachtheia, a measure to relieve all debt of this era.

Too much debt has been accumulated around the globe. If Greece falls, you can count it will be just the first tile to fall.

Posted by pap2pap | Report as abusive
 

4 years.. every plan by the troika fallen out..the economy going worse every day.. how on earth you propose this as a valid option? We have studied economics too, and we can see how Euro is heading to its doom day by day. Nothing seems to change, so we in Greece will change what we can, with our vote

Posted by epirat | Report as abusive
 

I think the real question is this, after Greece, Portugal, Italy, etc have failed economies, who will step in to pick up the pieces? Who will benefit from the hyper-inflation that will and always does follow such economic upheaval?

“Even the striving for equality by means of a directed economy can result only in an officially enforced inequality – an authoritarian determination of the status of each individual in the new hierarchical order.”
– Friedrich August von Hayek

Posted by storytellerFL | Report as abusive
 

Changing the guard in Greece is not the answer, it will only delay the inevitable – which is the restoration to economic power of the ottoman empire; why else do you think this fool in the White House is encouraging an Arab Spring? And who do you think will benefit from hyper inflation? It isn’t going to be the poor! So who is Obama really helping while he helps himself?

Posted by storytellerFL | Report as abusive
 

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