I know many think Greek default tonight would be catastrophic for the Euro. They may well be right. But do you know what? On really important issues like this decisions cannot be rational, they have to be taken on the basis of instinct. Like most important decisions in life there are far too many variables to allow anyone to be rational on this issue so the question comes down to a simple value judgement which is this.
Do you put the value of maintaining a currency and the free flow of capital above the value of democracy, the right of a nation to determine its future, a people to work for their living and a generation to have hope for their future?
And do you value the maintenance of democracy above giving extremists carte blanche to take over, again, a nation state in Europe?
And who, anyway, is the extremist when it has come to pass that this question has to be asked?
Instinctively, socially, politically, ethically and maybe even economically there seems to be only one choice for Greece, whatever the rights and wrongs of the situation that brought them to this point, and that is that they must now default given the scenario Germany in particular has faced them with.
Yes this could spell disaster for the Euro. But that's a disaster that is going to happen: Europe cannot be run as a branch of Germany, which is in any way a total economic impossibility.
We are going to face a crisis come what may on this issue sometime soon. Better the Greeks survive as a democratic nation state I say than sacrifice them on the inevitable pyre of the Euro, soon to be lit.
I am well aware that this scenario escalates the crisis now, but that merely means we will face the crisis sooner rather than later. And if that's the case maybe it's better that the time is waiting is over and that the people of Greece have a chance to recover from this nightmare, as the rest of Europe will need to do as well.
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If they don’t default very soon, then they will eventually anyway. This is a bullet that eventually must be bitten. However, the supremely wealthy in Greece will fare much better when this happens than everyone else as they’ve been husbanding the country’s resources by taking them from the other 99%.
Just as is happening here, in fact. That’s something to bear in mind. Survival will soon be the only law, at least for a while, and the wealthy have been steadily equipping themselves to do that at the expense of the rest of us for some time now. Best to prepare then and people already doing this are called preppers, here in the UK, specifically they’re called UK preppers. Googling for the term will give late starters some timely ideas.
For once I agree with you completely. Sadly I don’t think it will happen.
You may be right but there is an ongoing issue here.From my experience of liviing and working in Greece some years back, strip away the surface and it is a dirt poor country.
This applies to some other countries in the EC too. So, quite frankly they will always need some degree of subsidy. No, they should not surrender democracy, but if they want the benefits of EU membership, then they have to lose some independence too.
Subsidy isn’t on offer. Austerity is. That’s all.
But subsidy has to be on offer
It’s the only viable option for Europe
Yes, absolutely cross-subsidy from surplus nations to deficit ones is the only way the Eurozone can survive in its present form. I’m just noting that it’s not on the table at the moment. All that is on the menu is austerity and more austerity. Unless that changes, it’s difficult to see how the Eurozone can remain together. Something has to give.
You’ve heard of course that the Eurozone is proposing sanctions against Spain for failing to meet austerity targets? More to come I think.
Again, there is an odd air of agreement between us
Excellent post. Good to hear an economist talking in terms of values – which are often hard to pin down in terms of rationality – instead of what has become standard economic ideology.
Would defaulting really be that bad for Greece? Certainly, they have no real sovereignty over their economic affairs so their situation is rather different, but Argentina defauted on its IMF loans in 2001 and has never looked back! Recovery for Argentina started six months after they defaulted.
There will be a currency devaliation, but that may well be good for its export markets.I don’t believe for one moment Greece will come out of the euro unscathed, in fact, it may well get worse before it gets better.
That said, I don’t believe it will be the unmitigated disaster for Greece that some commentators assert!
But Stevo
Argentina has natural resources and good farming land. In 2001 there was an expanding world economy. I keep reading on the BBC websites that southern Europe has become uncompetitive as their income has risen up to 30% while Germany’s has remained more or less static. Yet I am sure Greek/Spanish even Italian wages are much lower. The UK is 20-30% down against the euro compared to 2008 and our exports are not that much higher.
I feel we need a wider reform.
Perhaps not so much reform as reformation; one of my contributors has come up with this lengthy but rewarding piece Time for a New Reformation I recommmend commenters here read it, I think it gives an excellent overview of what’s going on in the world at the moment.
From Wikipedia:
“Greece enjoys a high standard of living and “very high” Human Development Index, ranking 29th in the world in 2011,[24] and 22nd on The Economist’s 2005 worldwide quality-of-life index.[25] According to Eurostat data, GDP per inhabitant in purchasing power standards (PPS) stood at 94 per cent of the EU average in 2008.[26]
Greece’s main industries are tourism, shipping, industrial products, food and tobacco processing, textiles, chemicals, metal products, mining and petroleum. Greece’s GDP growth has also, as an average, since the early 1990s been higher than the EU average.”
Greece once had good economic factors such as the one’s above in place. They can do so again if they are allowed to run their own economic affairs and have their own currency and central bank.
Sure the resultant devaliation after default could be a double-edged sword. The weaker currency could be good for its tourism and exports, but could leave it vulnerable to currency speculation if safeguards are not put in place.
Yes, there was economic expansion in 2001, but the IMF made life difficult for Argentina after they defaulted. I think its fair to say they recovered largely under their own steam.
Bill Kruse
As a former history teacher (comprehensive school) I enjoyed your New Reformation.
I find it telling that Stephanie Flanders, Robert Peston and others, don’t tell us about possible alternatives. They only go through the choices within the paradigm.
As Thomas Khun pointed out in his “Structure of Scientific Revolutions”, new ideas don’t become accepted through rational debate but when the old guard retire or die off. I hope we have the time. If not perhaps God can remove a few (in His time, of course and wishing no individuals any harm)!!
So true of Flanders et al
@Bill Kruse
Bill, thanks for drawing our attention to this article in Economania. I am reminded of an RI lesson years ago at my Devon Grammar School, when, not paying much attention, the master sprung a question on me asking me to define religion. Without much thought I replied “The control of the masses through fear and extortion.” After a shocked silence, I was asked to leave the classroom. Later, the school did support my application for Mensa membership though.
Years later after working in the commercial world, insurance, fund management and financial intelligence, I would give the same answer in relation to the activities of the international bankers!