Monday, 13 February 2012

Greece should default

Yesterday we saw the Greek parliament pass yet another round of crippling spending cuts amidst rioting in Athens. In return for more and more austerity, they will be loaned yet more money to add to their national debt, in order to pay off, for a few more months, the creditors hammering at the door.

And, whilst billions of money are being added to Greece's national debt, millions of Greeks are without jobs, and even many of those with jobs aren't getting paid enough to live off of. The situation is so desperate that there is a small but significant number of children being given up for adoption or left at orphanages simply because their parents literally can't afford to look after them. In short, the Greek people are suffering terribly for a crisis not of their own making. Because, let's fact it, Greece went into the eurozone, before it was economically ready, due to richer countries, such as Germany, giving them cheap credit and other incentives so that their own economies could benefit by gaining new export markets. After all, the German economy made billions through exporting to uncompetitive markets like Greece.

And now the Greek people are being forced to pay a horrible price for the mess dumped on their heads by a wealthy elite - many of whom spent the good years lining their own pockets.

So it's not surprising the Greeks are angry. But the massive, monumental pressure being placed on Greek politicians to make further cuts in exchange for further bailouts (e.g. more debt) means that any government the Greeks elect will end up following exactly the same economic policy.

And, given that the German public seem determined not to put their hands into their own wallets to back eurobonds (which would end most of the eurozone crisis almost instantly) but still want the benefits of a currency union with uncompetitive economies, this means that for Greece all that will happen is more austerity meaning more money being sucked out of the economy, less consumer confidence and an even greater fall in Greek GDP. And, at the end of it, after all that penury, Greece will still be saddled with a monstrous debt that it'll never be able to pay off.

So, if I were the Greeks, I'd simply say "up yours" to the eurozone and default on their debt. Yes, their country would be bankrupt but they wouldn't be in much worse a situation than the one they're already in and at least they'll be able to start rebuilding their country and their economy free from what is, effectively, dictatorship by eurozone economists and bureaucrats and politicians. If I were in their position I'd definitely much prefer being slightly poorer and in charge of my own destiny than poor and with my fate in the hands of foreign governments without any interest in my own well-being.

And, I should point out, I'm not a eurosceptic or someone who's a left-wing socialist - I support both the principle of the EU and the coalition government's economic priorities. But Greece is not the UK and, the way I see it, they're in a very deep hole and all the rest of the world is doing is giving them drilling equipment. And, from my (admittedly very) limited knowledge of economics, I'd say it's time for them to stop digging.

4 comments:

  1. "So, if I were the Greeks, I'd simply say "up yours" to the eurozone and default on their debt. Yes, their country would be bankrupt but they wouldn't be in much worse a situation than the one they're already in..."

    That is rather a Panglossian view.

    If Greece defaults, I suppose they will have to issue Drachmae. Who will accept currency from a bankrupted state? Quite possibly no one and I doubt Greece has large foreign currency reserves left. I doubt Greece is self-sufficient in food, never mind fuel, medicines, spare parts for its industries. It's people might well starve.

    This idea that Greece would solve its problems by defaulting is popular at the British politic poles, with Grauniad types jeering at the "banksters" and the Daily Toryprat's eurohaters braying for the collapse of the Euro.

    However, given the unpopularity that Greece's politicians have been willing to court in doing whatever they have to, to avoid national bankruptcy, I suspect that starvation would be the likely result rather than a mere decade of misery.

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  2. Give me control of a nations money supply, and I care not who makes it’s laws
    Amschel Rothchilds

    Compliant governments are ruled by the money men aided by a complicit impotent MSM peddling lies.

    The Greeks will/are going hungry now default or not Anon at least they would still own their own country which they can rebuild.

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  3. @Anonymous

    See, that's why it's a good thing I'm an engineer and not an economist. A little knowledge is a very dangerous thing so it's probably for the best that I'll never know enough about economics to be able to ignore people like you who actually seem to know what a default would actually mean for an economy.

    I suspect though, that it wouldn't be quite as bad as all that. I seem to recall that quite a few south american countries went bankrupt and now they're enjoying an economic boom (one which seems much more sustainable in the medium term than our financial service based boom).

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  4. But George, they went bankrupt *with their own currency*. As soon as default looks likely, all the Euros will flow out of Greece (look at the prevalence of Greek property investors in the UK at the moment, for example). There will literally be a flood of money out of Greece, leaving only the assets which can't be moved but will be virtually worthless because, as your anonymous poster said, no-one wants a valueless currency unless there is a viable export business.

    I doubt Greece would be reduced to starvation, but it would likely be a pretty awful experience. And the trouble with economics is, to be honest, we just don't really know what would happen. It's an art, not a science.

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