dimanche 5 avril 2015
What will it take for the euro zone to cut Greece loose?
Posted on 22:37 by nice news
The latest Greek bailout request being debated at the European Ä’s headquarters in Brussels is yet another chapter in what must surely be the longest-playing national debt drama in modern history.
Ironically, the country should never have been allowed to join the euro zone in the first place. Greece was granted membership in 2001 after presenting false data understating the true extent of its budget deficit. Three years later, the government finally admitted it had fudged its books to gain entry. But when Greece assumed the mantle of a euro zone member, financial markets overlooked the country’s overextended balance sheet. Greeks went on a new borrowing and spending spree, while again hiding the true size of their deficits from Brussels through a devious derivative scheme managed by Goldman Sachs. By the time an inquiry into that second fraudulent act was announced in early 2010, Greece’s national debt had more than doubled to a whopping €330-billion ($453-billion). The country’s debt ratings plummeted to junk bond status, putting it just weeks away from sovereign debt default.
Euro zone members faced a crucial decision: Cut Greece loose or bail it out. They had every right to expel Greece from the euro zone on the basis of such fraud, yet chose not to.
Implementing a bailout meant the euro zone had to overlook these transgressions and also trust that the country’s long-entrenched dysfunctional governance, out-of-control spending, bloated and unaccountable public service, business-crippling bureaucracy and institutionalized corruption could be miraculously changed. This reality was summed up in 2010 by German politician Michael Fuchs, now deputy chairman of Germany’s ruling coalition, when he said: “If we start now, where do we stop?”
In an April, 2010, column written during that debate, I wrote, “An EU bailout of Greece would surely lead to the rampant spread of a moral hazard disease deadly to the
Ironically, the country should never have been allowed to join the euro zone in the first place. Greece was granted membership in 2001 after presenting false data understating the true extent of its budget deficit. Three years later, the government finally admitted it had fudged its books to gain entry. But when Greece assumed the mantle of a euro zone member, financial markets overlooked the country’s overextended balance sheet. Greeks went on a new borrowing and spending spree, while again hiding the true size of their deficits from Brussels through a devious derivative scheme managed by Goldman Sachs. By the time an inquiry into that second fraudulent act was announced in early 2010, Greece’s national debt had more than doubled to a whopping €330-billion ($453-billion). The country’s debt ratings plummeted to junk bond status, putting it just weeks away from sovereign debt default.
Euro zone members faced a crucial decision: Cut Greece loose or bail it out. They had every right to expel Greece from the euro zone on the basis of such fraud, yet chose not to.
Implementing a bailout meant the euro zone had to overlook these transgressions and also trust that the country’s long-entrenched dysfunctional governance, out-of-control spending, bloated and unaccountable public service, business-crippling bureaucracy and institutionalized corruption could be miraculously changed. This reality was summed up in 2010 by German politician Michael Fuchs, now deputy chairman of Germany’s ruling coalition, when he said: “If we start now, where do we stop?”
In an April, 2010, column written during that debate, I wrote, “An EU bailout of Greece would surely lead to the rampant spread of a moral hazard disease deadly to the
What will it take for the euro zone to cut Greece loose?
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