These are the personal views of Peter Morici, a
professor at the
University
of
Maryland
's
Robert H. Smith School of Business and former chief economist at the U.S.
International Trade Commission:
Prime
Minister George Papandreou apparently lost his governing majority when
Socialist Finance Minister Evangelos Venizelos bolted in protest over the
decision to place to a referendum the Greek acceptance of the European bailout
for
Athens
'
finances. Apparently, democratic decision making is now a threat to the One
Europe designs of the continental elite.
French President Nicolas Sarkozy, and German Chancellor Angela Merkel and other
leaders see a referendum, and the chaos that would follow the fall of the
Papandreou government, as placing their cherished euro in jeopardy. That is
sad--the false obsession with a single currency places at great peril the
welfare of the Greek people and their democracy.
The bailout plan would cut in half the privately held Greek sovereign debt. However,
to receive this concession and other aid from richer EU governments, Greeks
must accept draconian austerity measures. These would further drive up
unemployment, and shrink
Greece
's
economy and tax base at an alarming pace, placing in jeopardy eventual
repayment of
Athens
'
remaining debt.
Ultimately, Greeks would face reductions in their standard of living upwards to
50%, perhaps more, to generate the exports necessary to pay off foreign
creditors. If everything goes as planned,
Athens
will
still be saddled with a debt that is 120% of their GDP a decade from now.
Things rarely go exactly as planned, and 120% of GDP is an amount most
economists believe is unworkable. Hence, the Greeks may bleed a lot for no real
purpose than to sustain a failed experiment in a single currency, and the odds
are steep against the plan succeeding.
Greece
's
finances could easily be in disarray again within a year or two--perhaps sooner
if the economic meltdown imposed by austerity snowballs.
The Greek people should be given the opportunity to vote on taking such a
gamble, and their fate should not be left to leaders far beyond their borders
and who they did not elect.
It is convenient for Europeans to blame the Greek mess on a government and
citizens who deluded themselves into believing they could live beyond their
means--forever. But the euro zone was fundamentally flawed from the start. It
lacked the common fiscal institutions needed to somewhat equalize the social
safety net across its participants.
More importantly, EU institutions are ill-equipped to deal with the fact that
common currency across widely diverse economic regions and political
jurisdictions will be overvalued for some--as in
Greece
,
Italy
,
Spain
and
Portugal
--and
undervalued for others, like
Germany
. This
makes the latter hypercompetitive, and leaves the former with chronic trade
deficits, shortages of currency, the need to borrow, and eventually the crises
these nations face today.
The bailout plan is a giant band-aid for a failed euro and the mistaken belief
that a common currency is necessary for a united
Europe
. The
EU was making very good progress toward an integrated continental market and
greater political and cultural cohesion before the euro. The euro has become a
symbol without a purpose--indeed a symbol with a destructive end.
Greeks should be given the option of staying in the EU but dropping the
euro--essentially the status the
UK
enjoys. By readopting the drachma, remarking sovereign and private debt to the
reinstituted national currency, and letting the value of the drachma fall to
levels consistent with a trade surplus that permits Greece to service its
debts, Greece's economy would begin to grow again, and many of Greece's army of
unemployed would be put back to work.
With a reinstituted drachma, foreign creditors would receive payments on Greek
debt less than they are currently owed as stated in euro. However, with the
Greek economy more fully employed and generating exports, the haircut a
reinstituted drachma would impose would be far less than will ultimately occur
through the mindless austerity now imposed.
Leaving the government, Venizelos stated "
Greece
's
place in the euro is a historical conquest by the Greek people that cannot be
placed in question… this cannot be made dependent on a referendum."
That thinking is backwards. The Greeks should accept the bailout and continue
in the euro only if they determine the currency serves them well. As currently
constituted, a single currency may serve the One Europe designs of
France
and
Germany
, but
make
Greece
and
the other Mediterranean states nothing more than the victims of a northern
conquest.