Monday, June 20, 2011

Take This Debt and Shove It

In response to this article about the crisis in Greece, recovering economist Atrios wonders why the Greeks don't default on the huge amount of government debt that the country will never be able to (entirely) repay.  The answer is (probably, I can't read the minds of Greek politicians) that there are competing interests in every country.  It's safe to say that Greek politicians and the Greek elites (whoever they are) haven't been acting in the people's interest over the past decade, given the bookkeeping fraud and tax evasion perpetrated by the two groups.  So, for some reason the Greek politicians must not see it in their interest to default, or at least default right now.  They may change their minds due to factors like being threatened by rioters, or finishing the transfer of their assets to Malta.

In general I remain a bit surprised at just how much the ECB is being run in the interests of Germany and the other core countries (NL, FR, and perhaps BE).  That's been happening for months now.  As bad as unemployment is here in the US, it is much worse in Spain and other countries at the periphery of the Eurozone.

Update 2011.06.23: Krugman summarizes the case for default in one handy graph.  Greece is not Argentina, of course, and global economic conditions are quite different now compared to 2002.  But the outcome for the Greek people is guaranteed to be better than suffering through years of austerity-induced economic contraction.

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