No one can possibly have missed that Greece is almost bankrupt.
But what the h-ll happened? According to BBC News Greece did benefit a lot from low interest rates as it joined the euro and used that opportunity to spend and borrow, a lot. Not so clever because what you loan, you eventually need to pay back. And payback time is now. Unfortunately at this moment the country has a jobless rate of above 10% and a debt burden of around 130% of GDP. And the country continues, as it almost always has been, to break the EU deficit rules by letting its budget deficit slip to about 13%, and reports state that it is probably even more.
So it's bailout time. The New York Times has an article on the situation and on the commitment of the euro members to help the poor country. But should they really? Has the country been good and tried to do things right? The answer to that must be no, the Wall Street Journal reports. It seems like Greece lied on their euro-zone application. It seems like Greece never, with one exception, met the committed goals on government deficit. It seems like they have spent their money like there was no tomorrow.
So what is the moral of this story? That a country can sink their economy, almost sink the EU and then just expect others to bail them out? The spender saved by the saver? Because that is what it looks like from the outside if the other euro countries pick up the bills. Or would it be better to let Greece default on its loans? That would probably drag the other PIGS countries with it, and maybe a few more. And that would probably be worse than doing the proper thing, to let Greece pick up the bills themselves.
A quote from John Maynard Keynes is in place at this time, "If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has". Can the EU afford to let Greece default?
The swedish newspaper Dagens Nyheter argues on its opinion page a few days ago that Sweden should help Greece by joining the euro cooperation right now. There is only one proper reply to that, and that is, Are you mad? How would that help Greece? And how would that, in any way at all, benefit Sweden? In no way whatsoever! Let us instead use this moment to consider the good fortune of any country that is able to control its own interest rates when necessary.
But maybe I could, perhaps, give what WSJ writes another thought. That the problem is not the euro, the problem is that Greece was allowed to join..
Last modified on 2010-02-11 at 18:20:43