Must-Read: Martin Wolf: The Difficult Choices Facing the Greeks
Must-Read: I do not know enough about the Greek situation to have an informed view. But if now is not the time for Greece to undertake a large-scale sovereign default, exit from the eurozone, and devalue, when would be the time? Continued cooperation with a Troika that wants Greece to run large surpluses would seem worse for Greece than a resort to cash-on-the-barrelhead balanced trade. And there seems no upside for the Troika: no German is made materially better off by a deeper depression in Greece.
: The Difficult Choices Facing the Greeks: “The Syriza government has failed to put forward a credible programme… has instead made populist gestures…
…It is, in brief, a dreadful government produced by desperate times. Yet the eurozone, too, deserves substantial blame for the outcome. One would never guess from its rhetoric that Germany was a serial defaulter in the 20th century. Moreover, there is no democracy, including the UK, whose politics would survive such a huge depression unscathed…. Syriza is the outcome of infantile and irresponsible Greek politics. But it is also the result of blunders committed by the creditors since 2010 and, above all, insistence on bailing out Greece’s foolish private creditors at the expense of the Greek people. Yet all these mistakes are now sunk costs….
[The Troika] seems to demand a move from a primary fiscal balance (before interest) of close to zero this year to a surplus of 3.5 per cent of gross domestic product by 2018… [and thus] fiscal measures that would raise the equivalent of 7 per cent of GDP and shrink the economy by 10 per cent. One does not put an overweight patient on a starvation diet just after a heart attack. Greece needs growth. Indeed, the economic collapse explains why its public debt has exploded relative to GDP….
Greek voter[s], face a choice…. The devil is… the never-ending demands of the eurozone for further austerity…. The deep blue sea is sovereign default and monetary sovereignty. If I am Prime Minister Alexis Tsipras, I think there is a third way–endless bailouts and few conditions. But I am sure he is deluded. So which would I choose? Being cautious I would be tempted to stick with the devil I know. but I might well do better to risk the sea.