By Simon Lambert for the Daily Mail
Published: 09:05 GMT, 29 January 2015 | Updated: 09:10 GMT, 29 January 2015
Should Greece leave the eurozone?
The election of Syriza has put the question of whether some of Greece’s debts should be forgiven firmly on the table – yet perhaps it would simply be better off out of the euro altogether.
Syriza has been elected on a ticket of writing down some of Greece’s huge debts. This has so far been dismissed out-of-hand.
Martin Wolf made an excellent case as to why this is a mistake in the FT. He pointed out that both borrowers and creditors have a responsibility when loans are made – and that the eurozone has not been as extraordinarily generous to Greece in its crisis as is often made out.
The bulk of the loans to Greece by the eurozone and IMF went on avoiding its bad debts having to be written down – protecting those who lent it money.
Hit hard: Greece's GDP has plummeted since the onset of the crisis as it struggles with debts
Analysis by blog Macropolis puts the total amount of loans from the eurozone and IMF between May 2010 and last summer at €227bn.
Macropolis writer Yiannis Mouzakis says: ‘There seems to be a general misconception that feeds a misleading narrative in which the loans were used to keep the Greek state afloat, maintain its basic operations and pay salaries of doctors, teachers and policemen.’
Yet he says that is ‘only part of the story’. Since 2013, Greece has run a primary surplus meaning that it spends less than it gets in.
His figures claim that the Greek state’s operating needs used up just 11 percent of the total funding, or about €27billion. Interest payments, maturing debt and helping the financial system ate up most of the rest.
Mouzakis argues: ‘To protect the integrity of the eurozone, the strategy has left Greece with a massive pile of debt and a quarter of the economy gone, still unable to stand on its own feet.’
As Wolf points out in the FT, at the same time Greece has suffered huge hardship.
Unemployment has hit 26%, youth unemployment is above 50% and GDP and spending have dived – with the latter down at least 40% on his figures.
He argues that failing to offer debt relief will push Greece towards default and create an existential moment every time a future crisis befalls a euro nation.
Wolf says: ‘Creating the eurozone is the second-worst monetary idea its members are ever likely to have. Breaking it up is the worst.’
On that point though, I have to disagree.
I feel that we are at the point where keeping the eurozone together in its current format risks worse consequences that revising it and allowing some to leave.
Greece got into the mess it is in because of the eurozone. If the country was in the EU but not the currency union, it could have devalued, indulged in its own money-printing if it so chose, regained competitiveness and got going again.
The existing eurozone simply does not work. Its members should chalk that up to experience and get a new plan – perhaps a tighter and smaller currency union if they want one.
The current approach to solving the crisis involves printing vast sums of money and throwing it at a wall in the hope it sticks, while playing a game of extend and pretend on debt and forcing a nation deeper into crisis.
Greece has been strong-armed by the eurozone into racking up unpayable debts rather than sorting them out in the fashion that nations have done for many years - with some kind of default or relief.
Undoubtedly, if Greece chose to exit the eurozone it would face great short-term pain. Yet by staying in it faces an awfully long wait for any gain - and the risk that down the line the same mistakes get made again.
The eurozone should recognise its mistakes and offer Greece the chance to leave. If it is so fearful that this will lead to other countries wanting to depart too, then perhaps it needs to take a long hard look at why.
Over the past two decades, the trouble the euro has caused seems to have far outweighed any benefits. It has surely triggered more division, economic pain, crisis and recriminations than continuing the old-fashioned EU without a currency union would have done.
How bad do things need to get for the eurozone leaders to put their hands up and say we made a mistake?
The eurozone should offer Greece debt relief if it stays in the euro, which is the case put forward in Syriza scoring its election victory.
However, I can’t help but think it would be better to give the Greek people a referendum on whether they want to leave the eurozone while staying in the EU – and if Greece wants to go it should be allowed to and given the help it needs to get back on its feet.
Where did the money go? Macropolis crunched the numbers on where EU, ECB and IMF loans went
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Published: 09:05 GMT, 29 January 2015 | Updated: 09:10 GMT, 29 January 2015
Should Greece leave the eurozone?
The election of Syriza has put the question of whether some of Greece’s debts should be forgiven firmly on the table – yet perhaps it would simply be better off out of the euro altogether.
Syriza has been elected on a ticket of writing down some of Greece’s huge debts. This has so far been dismissed out-of-hand.
Martin Wolf made an excellent case as to why this is a mistake in the FT. He pointed out that both borrowers and creditors have a responsibility when loans are made – and that the eurozone has not been as extraordinarily generous to Greece in its crisis as is often made out.
The bulk of the loans to Greece by the eurozone and IMF went on avoiding its bad debts having to be written down – protecting those who lent it money.
Hit hard: Greece's GDP has plummeted since the onset of the crisis as it struggles with debtsAnalysis by blog Macropolis puts the total amount of loans from the eurozone and IMF between May 2010 and last summer at €227bn.
Macropolis writer Yiannis Mouzakis says: ‘There seems to be a general misconception that feeds a misleading narrative in which the loans were used to keep the Greek state afloat, maintain its basic operations and pay salaries of doctors, teachers and policemen.’
Yet he says that is ‘only part of the story’. Since 2013, Greece has run a primary surplus meaning that it spends less than it gets in.
His figures claim that the Greek state’s operating needs used up just 11 percent of the total funding, or about €27billion. Interest payments, maturing debt and helping the financial system ate up most of the rest.
Mouzakis argues: ‘To protect the integrity of the eurozone, the strategy has left Greece with a massive pile of debt and a quarter of the economy gone, still unable to stand on its own feet.’
As Wolf points out in the FT, at the same time Greece has suffered huge hardship.
Unemployment has hit 26%, youth unemployment is above 50% and GDP and spending have dived – with the latter down at least 40% on his figures.
He argues that failing to offer debt relief will push Greece towards default and create an existential moment every time a future crisis befalls a euro nation.
Wolf says: ‘Creating the eurozone is the second-worst monetary idea its members are ever likely to have. Breaking it up is the worst.’
On that point though, I have to disagree.
I feel that we are at the point where keeping the eurozone together in its current format risks worse consequences that revising it and allowing some to leave.
Greece got into the mess it is in because of the eurozone. If the country was in the EU but not the currency union, it could have devalued, indulged in its own money-printing if it so chose, regained competitiveness and got going again.
The existing eurozone simply does not work. Its members should chalk that up to experience and get a new plan – perhaps a tighter and smaller currency union if they want one.
The current approach to solving the crisis involves printing vast sums of money and throwing it at a wall in the hope it sticks, while playing a game of extend and pretend on debt and forcing a nation deeper into crisis.
Greece has been strong-armed by the eurozone into racking up unpayable debts rather than sorting them out in the fashion that nations have done for many years - with some kind of default or relief.
Undoubtedly, if Greece chose to exit the eurozone it would face great short-term pain. Yet by staying in it faces an awfully long wait for any gain - and the risk that down the line the same mistakes get made again.
The eurozone should recognise its mistakes and offer Greece the chance to leave. If it is so fearful that this will lead to other countries wanting to depart too, then perhaps it needs to take a long hard look at why.
Over the past two decades, the trouble the euro has caused seems to have far outweighed any benefits. It has surely triggered more division, economic pain, crisis and recriminations than continuing the old-fashioned EU without a currency union would have done.
How bad do things need to get for the eurozone leaders to put their hands up and say we made a mistake?
The eurozone should offer Greece debt relief if it stays in the euro, which is the case put forward in Syriza scoring its election victory.
However, I can’t help but think it would be better to give the Greek people a referendum on whether they want to leave the eurozone while staying in the EU – and if Greece wants to go it should be allowed to and given the help it needs to get back on its feet.
Where did the money go? Macropolis crunched the numbers on where EU, ECB and IMF loans wentwindow._taboola = window._taboola || []; _taboola.push({mode: 'autosized-generated-text-under-1r-' + 'row', container: 'taboola-below-main-column', placement: 'wide'}); _taboola.push({flush:true}); var rcShoutCache = '{}'; window._taboola = window._taboola || []; _taboola.push({flush:true});
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