I have always been a sceptic of the Euro: how could a region so disparate, that contains countries so economically and culturally diverse as Germany and Greece, sustain the “one size fits all” policy?
A recent editorial stated that “the Euro was a catastrophe waiting to happen, as constricting for strong economies as it would eventually be crippling for the weak”. For both Greece and Ireland their problems have been made far more acute by being members of the euro, and thus unable to print their own money as a way of resolving the situation. Where would Bernanke be without his ability to push the button on those presses?
Boris Johnson, Mayor of London, recently came out and said it was time to let the Greeks exit the Euro and default. The modern state of Greece has spent half of its 160 year history in default on its debt – so this is not a new idea for Greek politicians.
Yet Greece’s politicians have just voted through a five year austerity package. That’s all very well and good, but it’s easy to legislate – the problem for them is to enforce the legislation.
The Greek culture is just not the same as that of Germany or the UK – or the USA. In the latter countries there is sufficient fear of the tax authorities that tax is actually collected. In Greece on the other hand, the black market survives and thrives – amongst the people and their politicians alike. Latest data indicates that every sixth Greek pays bribes of €1,500 per household, or €1 billion nationally, a year. As for their politicians, the Athenians have a saying: ”there are as many ways to pillage the state coffers as there are islands in the Aegean.”
Greeks may be rioting that their entitlement programmes are being cut – but they are also demonstrating against their government, which has recently been described as a: “monument to dynastic political corruption.” Children may have been inheriting their dead parents’ pensions but bonuses have been paid to civil servants for washing their hands. Political parties owe vast sums to utility companies – and they are the ones telling the 40% of small consumers who are also not paying their bills that they should. Little wonder 9 out of 10 Greeks think their politicians are corrupt and 80% say that their Parliament has lost credibility.
Greece accounts for about 1.5% of Eurozone GDP. It did not even meet the entry criteria for the Euro on its own suspect official data and had no place being part of it. Surely it is now time for Greece to depart it and to have a debt rescheduling — a partial default.
No one’s interests will be served by Greece remaining in the Euro for the long term. Portugal may also have to leave. For the currency to survive, any aspiring members must meet all criteria – and stick to them.
Of course, in this time of global contagion it would undoubtedly be a problem if Athens defaulted, especially for France, whose banks hold $14 billion of Greek government debt – it’s why the French have been fighting so hard for Greece to remain in the Eurozone.
Time will tell if contagion means that a Greek tragedy will all too soon become a world one. But throwing money at the problem is now, surely, just prolonging the agony?