Euro a Failed, Flawed Experiment?

Communists Among those Pleased with the “No” Vote in Greece 

Communists are a happy bunch, mightily pleased with the “no” vote in Greeks. The vote was against austerity that lenders were seeking to impose on Greece.

I have sympathy for the Greeks, particularly for the elderly, with the country tottering on the brink of bankruptcy. It is particularly sad to see one of the world’s greatest civilisations and a country with a rich historical tradition land itself in such an abyss.

But the current predicament of Greece is of its own making. When you borrow tonnes of money you cannot expect your lenders to sit idly and watch you squander that away. It was not charity, so their expectation was for Greece to follow some fiscal discipline so they will have the ability to replay the loans. Instead, what the lenders saw was Greece defaulting.

Bad Governance: With the Euro as its currency, the Greeks must have actually been sitting pretty. Suddenly in 2001 they found themselves with a currency much stronger than the drachma that they were using earlier. Even with a fixed exchange rate, they had a more stable currency.

What resulted with the emergence of the Euro was bad governance in Greece which has left the country in recession almost all through the last 10 years or so. At this stage going into whether the Euro was a mistake is not going to make much sense.

Why should lenders sympathise with a small country that has failed to manage its economy well and has consistently been asking for more funds to pay off their debts. Robbing Peter to pay Paul?

The next few days will decide whether Grexit finally happens and what currency options Greece will be left with. No country has any big exposure to Greece other than who lent money to them. So I would not expect any major global economic crisis because of that. Precisely why the markets did not see any knee-jerk reaction to Sunday’s “no” vote.

Greece may still stave off what appears inevitable as not everyone wants Euro to end up as a failed experience.

G Joslin Vethakumar

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