The Shotgun Blog
Tuesday, February 16, 2010
Eurozone should kick Greece out, not bail them out
The Greek economy is in danger. They have a debt burden larger than their economy and a deficit that makes the Obama Administration appear to be prudent. Things are so bad that if Greece was not already currently a member of the Eurozone, the Euro wouldn't touch them with a ten thousand kilometre long stick.
This poses a problem for the common currency countries. The Greek economy is disastrous enough that it is dragging down the Euro, thus creating potential problems for the other sixteen Eurozone countries. They are forced to contemplate a bailout of the Greek economy to save themselves from being dragged under with them. They are being rather hesitant on what form that bailout will take, but they have at least tentatively pledged support.
Bailing out Greece will be a mistake. Yes the financial crisis has hurt the Greek economy just as it has hurt everyone's economy, but that is not the source of their problems. The Greek political leadership has constantly acted irresponsibly and have continually refused to rein in spending or reduce debt. The Greek government has no one but themselves to blame for their predicament.
If the Greeks are bailed out this creates a dangerous precedence. Countries with similar debt level, such as Italy, will take note. If a politician feels that they can do whatever they want and turn to the Eurozone to avoid the consequences, then the Eurozone will suffer from moral hazard.
Today Greece, tomorrow Italy, perhaps the next day will be Spain. Where exactly will it end? Where would Germany, the country that will bear the greatest cost, draw the line? I suggest that they draw the line not at Greece but before Greece. That is to say, do not bail out the Greeks.
Instead kick them out of the Eurozone. This would cost the remaining members nothing of significance (in fact it would likely increase the value of the currency) and it will serve as a sharp lesson.
The lesson will be: even in Europe, there is no such thing as a free lunch.
Posted by Hugh MacIntyre on February 16, 2010 | Permalink
Sure, kick Greece out of the union. Kick Italy, and Spain out, as well. There go three of the last countries with a chance of resisiting Islamic takeover. You're left with France, the Netherlands, Great Britain, et al. All about to be overrun by the Islamic mob.
To hell with ecomomics, it's time to focus on saving a small piece of European culture.
Posted by: dp | 2010-02-16 8:35:05 AM
dp, I said kick them out of the Eurozone I said nothing about the European Union. The two institutions may be linked in some ways but they are not the same. Actually I'm not even sure if Greece can be removed from the EU without their consent.
At anyrate I don't get how any of this has to do with Islam.
Posted by: Hugh MacIntyre | 2010-02-16 8:54:25 AM
It's early, and I should stick to posts about food and stuff.
Posted by: dp | 2010-02-16 9:23:25 AM
I predict the U.S. will have the same dilemma with California in ... oh ... probably less than 18 months ;)
Posted by: Charles | 2010-02-16 10:56:20 AM
Not only that, Charles, but we may see a situation where the states that are paying for the bailouts start demanding the right to secede from the union.
Posted by: Dennis | 2010-02-16 11:11:02 AM
Wouldn't that be the same as ending equalization payments within the deranged Dominion? I was thinking of all the bad habits that Alberta finances in the "have not" Provinces. The other day, I think it was the Nova Scotia government spent $40,000,000 (of Oil Sands money) buying private forest land from Irving to de-industrialize into park status. And if you want to talk about real money just look at Quebec.
Posted by: John Chittick | 2010-02-16 11:20:08 AM
Charles, yes they will.
John Chittick, yes it is.
Maybe not in all the details and legal form, but it is for most practical economic and political reasons.
Posted by: Hugh MacIntyre | 2010-02-16 11:28:39 AM
Hugh...clearly you do not comprehend/understand of which you speak.
Greece is indeed having to make major changes (economic, social and political) as is Italy and some of the newer entries into the EU but this doom and gloom stuff reminds me of the Global Warming nonsense.
The UK is the "Sick Man" of Europe and while they are not part of the Euro nor Schengen...they are kept alive for political reasons.
Much like Ontario and Ottawa.
Posted by: Observer | 2010-02-16 11:44:04 AM
Reverse Anschluss anyone? I see the EU bailing out any and all Eurozone members. They will find a way. The idea of a united Europe is way too significant to fail. It will be a test of the strength of the union.
Posted by: Agha Ali Arkhan | 2010-02-16 3:57:15 PM
Of they can bailout any member they want. It's called the printing press.
Posted by: Charles | 2010-02-17 5:49:48 AM
Bail them out with extremely stringent conditions e.g. ban unions , raise retirement age , etc. , as an example of what will happen to the next one . In the States it seems pretty unfair to be bailing out the spendthrifts like California by the more prudent ones like Texas. Or for that matter for the savers to be bailing out the stock and real estate speculators , which is what is happening now . Or , for that matter for the $7/hr fast food workers to be bailing out the $30/ hr auto workers. Thank you Barney Frank and co.
Posted by: daveh | 2010-02-18 9:06:55 PM
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