Eleftheria i Thanatos

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Greece loses its voting power, the worst humiliation suffered by a Eurozone member
Monday, March 29th, 2010
Horror

Greece is truly a fascinating country, with its exquisite beauty and long ancient history. However, it is not all sun, food, wine and vivacious nightlife in Greece. Today, due to a poor fiscal policy combined with a strong Euro has created a Greek tragedy and the country is tumbling further down the rabbit hole. In disparity, the Greek Prime Minister launched a diplomatic quest for concrete support from European leaders to ease the country's debt crisis. Not to mention the outbreaks of severe violence from protesters.  Among developed countries Greece has the worst deficit last year, at 12.7 percent of GDP. Also, the public-sector has a debt equivalent to 113 percent of its economy.

What is the problem? The problem is fiscal. Therefore, what needs to be done to mitigate this calamity in Greece? One option is default meaning that Greece gets no help at all. Option number two implements a rescue mechanism, which will push through a fiscal reform.

Pro

By using the default option it sets a strong example for self discipline. This will reinforce the 'Maastricht Treaty' with the 'no bail out' clause. It could satisfy the public in other countries where the majority of citizens do not want to see their tax money used to bail out Greece. And especially if Greece falsified its budget to get into the Eurozone.

Option number two will showcase the ultimate political strength of the Eurozone to mitigate internal issues. If this option works it will enhance European coordination, which will undoubtedly push forward in a crisis situation.  This will underline the competiveness in Eurozone with one cause being increase wages and low person power for productivity. Nevertheless, this will highlight the beggar syndrome where countries with high surplus will be begged by low surplus countries.

Con

The default option will further weaken the Greek government, which will make it next-to-nil for Greece make a structural reform. If Greece leaves the European monetary union (EMU) this could have a haphazard affect on the Euro, which could devalue it further. Thus, Greece lacks competiveness and it will not improve.

The rescue mechanisms that are required to help Greece lack human resources, political ideologies and technical aptitude, which could make for a clean, clear-cut rescue for Greece. Greece has lived far beyond its means, which not, it relies on heavy borrowing from European states and subsidies. The change or adoption of this rescue will have hurdles and obstacles for the Greek people.  This could further magnify public protest against the government and for the individuals that impose harsh conditions on the country.