Saturday, July 18, 2015

A case for booting out Greece

The tiny state of Greece has been in the news for all the wrong reasons recently, having become the first developed country to default on its IMF repayment, with unemployment soaring to 25% and the economy shrinking. And despite all assertions by Thomas Piketty, it is very much the government of Greece and the people who elected them that are to blame. There are many levels to this.

The Greek government cooked its books to get into the EU and the Eurozone - this is an undisputed fact. It did not meet the requirements for entry into the EU, and by that very reason it should be booted out now. It is not the same as saying that the eurozone is not permanent (is anything?) - it is saying that deceit cannot get you in. Indeed, the rules for admission to the EU are the only common fiscal policy that the EU has. Thus, even as EU countries in the eurozone give up their monetary policy to the ECB, in the absence of any coordinated fiscal policy, there is bound to be chaos. By booting Greece out of the EU, the bloc would be able to assert itself as a political union that is committed to the idea of honesty and a rules-based system that respects national sovereignty. Without even this veneer of a common fiscal policy, the entire eurozone is doomed, almost by definition.

As if all this wasn't enough, the Syriza government in Greece has just shown how fond it is of smoke and witchcraft. The Prime Minister ordered a referendum on the EU bailout proposal, a referendum that failed to meet standards. Quite contrary to popular perception, a referendum must be preceded by honest, nationwide debate that talks about both sides of the coin, a debate that must be supported by the state even if the position of the ruling party is sharply on one side. The Greek referendum was nowhere near that, it was basically a Syriza referendum, and the outcome was predictable.

And that funniest thing of all is that it was all unnecessary, because the PM then chose to virtually accept all the terms set by the EU when he realized that Germany (although not France) was quite willing to throw it out of the EU and set off what could possibly be a century of (further) decline. The terms were humiliating and humorous in equal measure, with one clause calling for more competition among bakers in Greek cities! And yet, the PM took the terms to Parliament and used all his political muscle to get it through, making enemies of his own supporters and his own party. If the PM was finally going to do what the Germans had prescribed, why all the loud noise and the pointless referendum?

In the end however, it is a fact that Greece cannot pay back its debts on time. It is approaching 200% of GDP and the IMF has called it unsustainable. Either the loans are restructured and spaced out over the next century, or Germany forgives most of it. If it's the second case, then it makes perfect sense to boot Greece out of the eurozone and the EU, because Germany would have to foot the bill in any case. High-sounding rhetoric aside, a #Grexit is really the best option, even now. The only other option is a century of humiliation for the Greeks. As you sow, so you shall reap. 

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