Greece: Cut Loose


News has been swirling around the European Debt Crisis for a couple years now. Most of which has been centered on the PIIGS nations, in particular Greece.

With the impending doom of Greece being cut loose from the European Union, I find it an appropriate time to make a simple prediction.

German chancellor Angela Merkel and the rest of the Northern European leadership have been hamstrung over the last year by austerity measures and continued bailouts of debt-obsessed countries like Greece and Spain. But I can’t honestly see how those leaders will continue to offer assistance to PIIGS countries (especially the Greeks) when the peoples of those nations don’t seem to want anything else other than mere handouts from their wealthy northern neighbors. After all, Germany, the UK, France, and some Scandinavian countries are essentially transferring their own wealth in order to better accommodate the spendthrift governments of the south and west. No one in their right mind from those former countries would continue to agree upon terms if the latter countries weren’t proving competent in getting their acts together.

So, cutting Greece loose appears to be the route most in the EU will prefer, despite Merkel claiming an awaiting disaster to the euro if that were to happen. But, provided this does happens, I have a bold prediction to make on the matter.

Greece being autonomous again (and subsequently returning to the drachma at 50-30% of the euro value) will stand to benefit only the Greeks. Sure, the relieved pressure from a debt-laden country will help the Euro Zone in the short-term; but the problem for the Euro in the long-term is its attachment to a broad economic spectrum with varying types of economies. The Euro was doomed from the outset, and its fate was sealed when EU leaders chose to over-expand their membership to the Union by welcoming many of the Balkan and Eastern European nations into the fold.

No, the Greeks will come out as the true benefactors of the split. My reasoning is simple — this allows them to establish an economy that is all but brand new. True, they do not have a history of providing astonishing economic resources; primarily tourism, shipping, and agriculture. But those things are important all the same. Returning to the drachma allows them to mold their own financial destiny while focusing their efforts on sustaining and expanding their existing product.

Now, there’s a single caveat that must apply here. That being Greece and their new government must stick to some sort of fiscal responsibility and tight-fisted spending policy in order to be successful. The same fiscal problems remain even if Greece is abandoned by the rest of Europe; the challenges remain. So, if Greek autonomy merely results in more spendthriftness and debt accumulation, the Greeks will serve the same fate as the rest of the EU. Remember that all government expenditures must be paid for eventually; accumulation of debts cannot go on ad infinitum. The result of this policy ends in one of two ways:  either the creditors come knocking and demand payment which could force default or a halt to further lending; or the Greek central bank inflates its way out of the mess by printing more drachmas. Whichever decision they choose in that situation, it spells doom for a prosperous Greece.

With the right precautions being taken, Greece could return to its status as a nation of mediocrity and happiness. All the while the Euro Zone takes step after step into oblivion. The separation of Greece from the euro is the keystone. I can’t for the life of me see how the Greek people could elect a leader willing to take those precautions, but if they do, mark my words:  Greece will be the victors in Europe.

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One Response to Greece: Cut Loose

  1. Pingback: Public Debt: A New Perspective | Waldlichtung

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