Back to the Greeks

I cannot believe that that last time I put a post on here it was March. Well, I have be been on a little break and in my absence much news has passed under the bridge of the 24 hour news media - the wonderful  Royal Wedding, followed by the welcome news of the death of terrorist Bin Laden (who was right 'bin bagged', whatever the liberal/left media might say about human rights), the welcome defeat of the AV referendum and the justly deserved punishment of the liberal democrats at the polls; the so-called 'Arab spring' and Libyian intervention. So having gone away for a few months and having returned there seems to have been much change in the political world, except of course one matter. That of the crisis in the Eurozone, a situation quite ironic given that this was the subject of my last post.

The subject of the Greek bailout and whether or not its government can push more austerity through their Parliament has been the subject of many a newspaper column in the past few days .Here we go again. The first bailout was cobbled together at the last minute and low and behold it hasn't worked so, we need a new bailout. This to me seems to be prolonging the agony, not just of the Greek people themselves, but also of the people  of the other nations of Europe, perhaps the world. For the simple fact is that no matter how much the Greeks cut (or for that matter Ireland or Portugal) the Greek government simply cannot pay back what it origionally borrowed and is also  having to borrow up to 10% of GDP every year, just to make up for the difference between recepits and expenditure this year.

This is not a good situation, but it is clear that the bailout II is not going to work either, for whilst many of the austerity measures might be simple pragmatisim (e.g. changing the retirement age from 50 or attempting to stop tax fraud or some measures of privitisation on state owned enterprises), these measures by themselves are not enough. In a usual situation the IMF would indeed press for the kind of package that the Greeks are having to implement , but with the key difference of a massive devaluation of the bailout nation's currency (by 20-30%),  in order to boost exports and to take up the slack of the cuts imposed,something which the Greeks, under a currency better suited to Germany, cannot do. So the Greeks are having to implement cuts and the like, without this key element of recovery, whilst the rest of the Eurozone bickers about what to do, although  it is clear that no-one involved in the Euro project wants the Greeks to seperate themselves from the Euro and adopt their own currency again.

The most logical course of action would be to allow for a devaluation of the Euro, to help the Greeks (and the rest of the "club med") governments, but this would and is opposed by Germany and the other wealthy north european states. The alternatives are therefore a return to the Drachma (the old Greek currency) or 'more of the same'.

This may be anathema to the Eurocracy in Brussels, who always want more Europe as a response to problems (Euro-treasury, Euro-treasury bonds)  who will doubtless do everything they can to stop this ,with good reason, for the European Central Bank would go bust - and with it  the Europhile dreams-if a Greek default happened given the billions they have lent to Greek banks, the security for which was, erm, Greek government debt.

'More of the same' is clearly not working and will only make the situation in Greece worse. Therefore, the only logical  and fair option is for an orderly transition for the Greeks to go back to the Drachma and sort its own finances out in the usual IMF way.  This may lead to another Lehmans or not. But it is better in the long term that such action is undertaken now. For the current bailout is only postponeing the day in which the Euro collapses, in an uncontrolled way, which would have dangerous consequences for the continent of Europe and the rest of the world.