Feb 082012
 

The Greek debt issue has been hanging as a sword on the market’s neck for almost two years now. Yet it seems more of the same. The country leaders ask for more loans fromEuro partners, they demand more austerity measures, followed by union strikes against these proposed measures, and so on.

There is an interesting chart on the blog “The Big Picture” sourced from “Spiegel.de” shown below, that puts the whole issue in perspective. Greek debt is ballooning up while their economic output is going down. So how on earth will they ever be able to pay back the debt?

Source: Spiegel.de, The Big Picture

The Greek problem is not just a debt problem that can be solved by austerity. GDP growth is also an important factor, and their hands are tied by Euro. An independent currency would have given them the ability to devalue it, which would have helped increase exports and tourism, thus raising the GDP. But they can’t do anything with Euro.

This brings to the issue of who should pay for this mess. Clearly the Greece government is a big part of this mess due to its uncontrolled spending, and now both the government and the citizens are paying for it. The other part, due to Euro, is more complicated. One can make the case that the country that has benefitted the most from a stable Euro is Germany as it has helped keep inflation low. Also, Euro has helped reduce compeition from countries like Greece where earlier the devalued currency would make them more competetive with German exports. So, isn’t it logical that the biggest beneficiary of this program should also share the burden now. What do you think?

  One Response to “Who is to blame for Greece mess and who should pay for it?”

  1.  

    How much blame should be placed on the citizens of Greece?? For the last 40yrs none of them want to work! Some 60% don’t pay taxes. They all want to retire at 45! It’s no surprise that the Euro countries of the south are dragging everything down as they are in hot vacation country and want to relax all day long.
    It’s time to pay for the party!
    No doubt the government has had a hand in this as well but you gotta call a spade a spade! I’m tired of people saying how unfortunate it is for the Greek people. Ya it’s too bad but they are partly to blame!!!