Should Greece be Punished for Their Debt

Acropolis, Parthenon, Athens, Greece

Suppose you’re the parent of a child of small academic ability.

Your child’s school opens a new enrichment program, intended for the most competent and talented scholars, where duties will be rigorous and homework will be extreme. To be able to qualify, children whose parents want them to participate must be analyzed. School officials will then examine the results and decide which children make the cut.

You know your child’s scores won’t place him at the academic elite for which the new program is made. However, you want your child could be eligible, because not only will the talented course receive more work, but also more privileges. Maybe more pressingly, you do not want your child to be left out of this high performer class and classed with another run-of-the-mill students.

Can you lie to get your kid into the elite group?

That’s just what Greece’s leaders did. Except instead of a gifted and talented class, they lied to receive their run-of-the-mill nation into the eurozone.

(1) The nation cheated on its entry exam in 2000, misstating its shortage relative to gross domestic product. In actuality, the nation hasn’t been inside the threshold for this step anytime between that entry exam and today.

Greece lied to get in the eurozone, and it lied about its own economic statistics after it adopted the euro, at least until it could no longer conceal the truth.

Syriza, a far-left party, formed a coalition with the Independent Greeks, a right-leaning party that agrees with Syriza on small except that the rejection of austerity. This dilemma was enough, evidently, to form the basis of this arrangement that gives the coalition a clear majority in Parliament. (2)

Greeks are fed up with trying to keep up with the homework that is assigned by the”troika” – the parties responsible for determining whether Athens will keep on getting the life-sustaining IV of European currency which enables it to pay its bills and its already-rescheduled debts. A whole lot of that money comes from Germany, the super-smart child that everyone in course resents and envies.

(The total budget remains in deficit, since Greece is still repaying the debts that it ran up under the truth-challenged former authorities after it joined the euro.) However, the achievement has come at tremendous price. A massive number of Greeks lost their jobs once the bureaucracy was slashed, and about one in four Greek employees is officially unemployed. Given the history of Greek figures and the trend in that country to match all kinds of government programs, however, my guess is that the true figure is somewhat lower, when the under-the-table part of the market is considered.

Tsipras promised he would renegotiate with Greece’s creditors and stay in the euro. The nation’s creditors may, in reality, wind up offering some concessions, possibly by extending out debts yet again. I don’t believe those concessions will be large, and they’ll almost certainly not be sufficient to satisfy a lot of those who voted for Tsipras and people who ran along with him.

So, despite Tsipras’ promises, there’s a very real chance that Greece will drop from the euro class.

Syriza’s success has raised the specter of comparable anti-austerity (read: anti-homework) parties gaining power, or influence, in places like Italy, Spain and maybe even France. These, also, are nations that have difficulty keeping up with the real high performers. Like Greece, they’ve gained from the excess enrichment opportunities open to them: the elimination of currency conversion costs, the simplification of cross-border contracts and the improvement of tourism.

Needless to say, when you pull enough kids from the enhanced course, you might not have enough children left to warrant having a course anymore. That’s fundamentally the danger that threatens the euro’s future. Yet even if individual nations demonstrate that they can come and go, I do not believe the euro will go away any time soon. High achievers such as Germany, Holland and Luxembourg have too many incentives to remain within the unified currency. New enrollees such as Lithuania are prepared to make sacrifices to attempt and keep up with the fast crowd. Ireland demonstrated that austerity need neither be permanent nor painful; the Irish came from the recession-induced diet with government financing in fighting trim, and a developing economy besides.

However, Ireland and Greece are two very different kids. Those, however, were one-time prices that could be paid. To put it differently, with a little bit of extra tutoring, the Irish have shown they are able to keep up with the Germans and the Dutch. The Greeks haven’t.

If they can not, possibly the best thing for all concerned is to confront the facts and let them return to school with the typical kids again.

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