Grexit Update: Greece and the Eurozone

drapeau hongrieTo understand the problem, it is important to clarify what ended in this situation. The accumulation of the Greek national debt was primarily due to the extravagant economic policy of the former Greek governments, but the European central institutions and the European Great Powers are also responsible for it. First, they let the national debt pile up without intervening at an earlier time. Secondly, they let Greece enter the European Monetary Union in spite of the fact that the Greek economic indexes didn’t reach the required level.
Later, the situation was worsened by the completely mistaken crisis management of the Troika (European Committee, European Central Bank and International Monetary Fund), with the rapid privatization of the Greek national wealth, serious constraints, and much more credit. The actual situation of the Greek economy proves the complete dilettantism of the Troika concerning the crisis management. Furthermore, the international credit market must be heavily criticised because it gave (and is giving!) credit to the Greek economy, in spite of its evident instability.
8ba235_c22368c7cb98451ea8062f3b5cb58fecWe can agree that the problem could have developed because of different factors, but it is of most importance that change be instigated immediately. First of all, the former Greek governments should take formal responsibility for the present crisis. Secondly, the current Greek government should give concessions. The “violent” privatization is unnecessary and harmful but the VAT (Value Added Tax) should be raised because it is below the European average. Thirdly, the population should give up some social “extras” that are unimaginable for lots of EU citizens (for example €1000/month pension, further allowances in the 13-14. month).
But these aren’t enough. More and more economists agree that the Greek national debt (170% of GDP!) is unmaintainable and unrepayable. Actually, some of them recommend the remission of a piece of the Greek national debt and the rescheduling of another piece. This may be the only way to avoid a Greek civil war. This measure would surely be followed by a great international public protest, notably by Germany, who would certainly not find the situation ideal. Indeed, it believes that this crisis should be solved the way the German government solved the crisis after 1990.
“The Greeks have only themselves to blame, and solve their own problems themselves! We already have done the same after World War II, our national debt was bigger than the Greeks’, and you can see, now we are the most powerful nation in Europe. We have already shown to Europe and to Greece with our economic wonder (this was the “Wirtschaftswunder”).” Lots of German citizens and politicians are saying the same around now.
We have to examine this German example better. The result was not the corresponding economic policy (it was important but not the biggest factor) but – and now comes the surprise – was the remission of the greatest piece of the German national debt in the 50’s! They ZEROED IT. And now, the Germans are the loudest when Europe pulls down Greece! They won’t hear of remission. Isn’t this a hypocritical and ungrateful thing?IRONIC
Thomas Piketty, the very famous French economist suggests much more, that the national debt of all of the EU-countries should be remitted at a big debt-conference, like in the 50’s. If we manage the problem from a serious economic perspective, not from a political one as the German government is managing it, the only one solution is the remission of a piece of the Greek national debt; there isn’t another real alternative, and all should to agree this.

by Lorinc F.