I believe it was Albert Einstein who defined insanity as doing the same thing over and over again and expecting different results.
The kerfuffle over Greece’s abysmal economic crisis is keeping the world’s stock markets on edge for the umpteenth time as the EU and IMF try to force them to take another dose of strong austerity medicine.
To receive the next emergency loan of €130 billion, Greece has to promise to make draconian budgetary cuts and implement the austerity measures already agreed upon. Predictably, consensus among Greek political parties is still being sought, as this would likely bring deeper recession.
However, to avoid default, the EU loan must be had by early March, when Greece has to pay off more than €14 billion in existing debt, or $18.5 billion or have a default.
MSNBC describes the situation in Greece this way,
Essentially, the country is broke. And to borrow enough money to stay solvent, the Greek government has agreed to severe austerity measures imposed by the European Union, European Central Bank and the International Monetary Fund.
The money will run out next month unless another chunk of the bailout is handed over. But the European Union wants even more cuts in government job, salaries and benefits.
Greek debt is over 160% of GDP – the highest in Europe. Only idiots believe Greece will ever be able to pay back all their debt. They are in full-fledged recession, worse even then the Great Recession of 1930. MSNBC tells us why this happened,
Successive Greek governments borrowed an estimated $498 billion, in essence to bribe the Greek people into being happy. Governments who could offer cushy office jobs, fat pensions and long vacations got re-elected. It made perfect political sense, but it was economic suicide.
Up to 40% of youths aged 18 to 24 are currently unemployed and public employees have taken a 40% pay cut. The economy is in a death spiral, but despite this, Merkozy – the acronym for Merkel and Sarkozy – and the EU are insisting on more austerity even as the economy contracts.
It won’t work.
Everyone knows it won’t work. The only thing keeping the dream of Greece in the EU going is pride. That’s right, pride. Pride in the boondoggle called monetary union that was tricked into accepting Greece in the first place based on falsified numbers.
No one wants to admit that Greece is bankrupt, and does not have the political will to comply with the EU’s mandates or the money to repay. However, the sooner the EU realizes Greece is a hopeless case and starts planning for its exit from monetary union, the better off everyone will be.
If not, pride in monetary union might end up breaking up the EU.
After a default, the Greeks will be able to reset by devaluing their new currency, making them more competitive – through sending them to sub-first world status for a decade or more. However, if they are serious, they will be able to earn their way back to a better life old fashioned way – mainly by hard work, not by wanton borrowing.
Surely, a lesson for America as well.