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Greece Edges Toward the Eurozone Exit?

Greece’s European partners demand changes that the average Greek doesn’t want to make. Greek politicians so far have tried to square the circle by making loud declarations about how determined they are — while making some changes but putting off the most painful ones.  That strategy is now running out of time; to keep the bailout funds coming in, the government will have to fire tens of thousands of government workers in the next few weeks and otherwise behave in a deeply unGreek fashion.

Meanwhile 9 out of 10 voters disapprove of the government’s economic policies, and the economy continues to shrink.

The Biblical story of the Tower of Babel is looking more and more apropos these days.  That story recounts how God divided what were then the unified people of earth into different nations by ‘confusing their tongues’ — by giving every people its own language.  Those peoples would go on to develop separate cultures and cooperation between peoples would always be a chancy and difficult thing.

Different countries have different political and economic cultures; not everybody is willing or able to play by German rules, even when they know that playing by those rules will pay off in the end.  Governments must make policy for the people they have; there is no point in trying to turn Greeks into Prussians.

The idea that Greece will ultimately have to leave the euro zone is being discussed at higher and higher levels around the world.  The time has come for the Greeks to put contingency plans together, and for the other euro countries to take steps to guard against bank panics and other consequences should a country that never really belonged in the eurozone decide to drop out.

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  • Jim.

    “Governments must make policy for the people they have; there is no point in trying to turn Greeks into Prussians.”

    Maybe it will take some pain to convince them that those values are ones they need to embrace. Learning isn’t always a pleasant process.

    There has to be a way to inculcate positive values into a people. Otherwise, what is the point of all your investigation into what made the West the strongest culture in history? Just idle curiosity?

    I have to believe, for the sake of the world my children will live in, that there is a way to keep the West on track.

  • Dimos

    Do you think that only Greece didn’t belong in the eurozone? You should know that not only Greeks but many other citizens would be against to these kind of mesures that Germany tries to implement to this country because they have no result in real economy. Almost one month ago USA was ready to bankrupt so the problem is not Greek is global. If we decide to leave Eurozone most probably the effect will be so big that there will be no Eurozone. If Eurozone cannot cover the deficit of a country with less than 2% participation in the European economy what will happen for Italy, Spain, Portugal, Ireland, Belgium? The problem isn’t economic is pure politics, my opinion is that if we leave Euro ( due to globalization) the effect will be so big that even USA will live a new Leaman Brothers or worse effect, because unfortunately in 2011 the economic funds decide what will happen and they bet billions of Euros in the bankrupty of several countries.

  • dearieme

    For years I used to joke that an EU that did contain Greece and didn’t contain Norway was seriously awry. And lo it came to pass, courtesy of the Euro, that others realised that there is often truth in jest. Does this sound like “I told you so”? Too true.

    I’m also full of “I told you so” about the Euro. Many political decisions are difficult and usually I claim no particular insight into what should be done. But some are easy: really, really easy. “Don’t!” was the obvious best policy on the Euro – “Don’t, you bloody fools.”

  • Charles R. Williams

    Greece runs a huge primary deficit. When Greece repudiates its debts, the Greek standard of living will collapse because bond investors will not finance that deficit. The adjustments will probably be easier if the Greeks abandon the euro but this is a secondary issue. Violence and severe deprivation are inevitable. The way forward is to liberalize the Greek economy and the Greeks may eventually find it.

    Greece would be irrelevant to Europe, except that eurozone banking 1)is highly leveraged, 2)is highly integrated, and 3)assumes that eurozone sovereign debt has zero default risk and 4)operates on the TBTF philosophy. Each European nation will have to backstop its own banks. They have boxed themselves into a corner where there is no alternative. Some will be unable to do so and the burden will fall on taxpayers of stronger economies.

    Will Ireland, Portugal, Spain and Italy follow the path of Greece? This is an open question. My guess is that Ireland will do fine if it repudiates its debts – unlike Greece but more like Iceland. I think Italy and Spain are big enough that the strong economies will find it more advantageous to backstop them than to deal with the consequences.

  • Jacksonian Libertarian

    This whole situation reminds me of the breakup of the Warsaw Pact, and then the Soviet Union. When it starts to fall apart it will happen very quickly. First the Euro will go, and then the EU will follow.

  • Peter

    I was in Greece shortly on a business trip and had to argue many times with restaurants and even hotel owners to get a receipt – meaning that the greek state doesn’t even get the VAT. Tax evasion and corruption are the main problem of this country – the northern European tax payers are no longer ready to spend money in this mess.

  • Glaukus

    Most of protests are Staged and very well Orchestrated, they pretend fighting but do not hurt each other. This is worth it to get hundreds of billions from EU. Greeks are very smart; the deception started with the Trojan Horse and is going on with very well orchestrated “PROTESTS”. If you want Greece to be paid off, for the Enormous Army, Universal Free Health Care, Lucrative Pensions, and Taxes that they never Pay, then you pay them by yourself, PAY THEM OFF, BY YOUR OWN POCKET.

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