Greece is on the brink, of default and/or exiting the EU, but no one seems to know how close the edge is, or how this can or will play out.
The EU seems unwilling to relax its demands for Greek austerity. And the new Greek government seems unwilling to play by the old rules, of giving in to EU demands to tighten the noose that is strangling the Greek economy and the Greek people
Despite the stand-off, some things are clear. The imposed austerity of the EU has not worked. A recent New York Times article said that the EU bankers predicted their austerity program would cause the Greek GDP to contract by 5%. Instead it has contracted by 25%. This means the EU bankers were wrong, catastrophically wrong, and indeed that their conditions have failed to result in a solution to the crisis. The EU is still playing by old rules, pursuing failed policies, merely because they have no clue what to do instead, are unwilling to admit their complicity in creating this crisis, and because they want to look tough to their constituents at home.
The new Greek government, beyond refusing to agree to a new round of failed policies, has not offered a workable alternative. Just saying no to failed policies, while a legitimate start to a new round of negotiations, is not enough.
The teeth grinding, contortionist antics of EU ministers and the media over how bad it will be if a Grexit occurs is nothing more than a useless distraction. So too speculation about whether it will be worse or better if Greece exits the EU or not.
If it wasn’t clear before, it should be clear now, that a new foundation is needed for a new round of discussions, and for achieving a real solution. Agreeing on some basic truths about the situation should set the foundation for finding a real solution.
First, the current crisis is the responsibility of both Greece and the EU – and it doesn’t matter which party was more to blame than the other. The fundamental issue is that European banks made improvident loans to Greeks and Greece, and Greece and Greeks improvidently borrowed funds they could not pay back in a timely fashion.
Second, the Greek governments of the past twenty plus years have been fundamentally corrupt and dishonest to the Greek people and EU bankers. All parties have suffered and will suffer for that corruption and dishonesty for a long time, especially if a solution is not found soon.
Third, whether or not Greece remains in the EU is not the most pressing question facing the parties today. But how it is handled can make a massive difference in what happens next, and in the world economic order for the next fifty years
The most important question today is what to do to get Greece back on a stable economic course, building its economy, creating jobs, taking advantage of its resources and capabilities, while getting off the illusory salvation of cheap loans with no repayment obligations and no obligations to get its national, political and economic houses in order. This is a responsibility of the EU, the Greek people and their government – regardless of the political party nominally in control. This is not a crisis that can be solved by ideology. Wishing, believing that the Titanic was unsinkable, did not stop it from sinking. Wishful thinking or head-in-the-sand denial will not solve this EU/Greece crisis
Failed policies or no policies will not save Greece any more than re-arranging the deck chairs on the Titanic. Greeks have the primary responsibility to create the solution to their problem. There is no need for Greece to be the sacrificial lamb, the Lehman Brothers of the current EU financial crisis. Greece and the EU have much more to gain by working together to create an economic environment that gives Greece a fighting chance. This will most likely involve substantial debt forgiveness and very substantial debt repayment deferral, while creating and implementing a “turn-around” plan to salvage this fundamentally bankrupt country, much the way corporate raiders effect turn-around plans at struggling companies. There will be a price to pay and some people will be hurt. But eventually, the suffering will end and a newly invigorated economy and a newly confident people can emerge.
If the EU won’t work with Greece, then it is clear the EU will toss Greece off the ship. Greece would be wiser to be the master of its own future, and either start its own turn-around plan and hope the EU will back it, or elect when it leaves the mother ship and sets its own course on realistic terms.
Surprisingly, when the 2008 financial crisis emerged, politicians and bankers of all ideologies in the U.S., forged a stimulus plan to keep the unthinkable from happening. There is no reason that type of creative and innovative success cannot be achieved for Greece, except lack of imagination and lack of political will. Clearly some new thinking is needed. Grexit or not, failure should not be an option.