Should Greece be "allowed" to go bankrupt?

[Blackmoor]

I'm not a political person at all so I don't follow these kind of things. But I can't help noticing that the EU (and predominantly France & Germany) are attempting to prevent Greece from going bankrupt.

They've put together a package to save the county, but this will mean the country as a whole has to adopt some austerity measures. According to www.dailymail.co.uk these include:

• Income tax threshold would be lowered from €12,000 (£10,300) to €5,000 (£4,300)
• Retirement age would be raised from 61 to 65
• VAT would rise from 19 to 23 per cent
• Higher property taxes
• Monthly pensions above €1,000 (£860) would be cut by 20 per cent
• Excise on fuel, cigarettes and alcohol would rise by a third
• To qualify for a full pension people would be required to complete 40 years work
• Retirees aged under 55 would lose 40 per cent of their pensions over €1,000 (£860)
• Public sector wages would be cut by 20 per cent
• Employees of state-owned enterprises would have their wages cut by 30 per cent
• A cap would be introduced on wages and bonuses
• 30,000 civil servants would be suspended on partial pay
• All temporary contracts for public sector workers would be terminated.
• Just one in 10 civil servants retiring this year would be replaced
• New levies on household incomes of between one and five per cent

The Greeks are not happy about this and so their Prime Minister is calling for a referendum on the issue. Meanwhile this is causing chaos in the European banks.

Obviously these are not nice things to have to accept for the Greek people, but what are the options? Apparently if they default on their debts, they are picked up by other countries in the EU.

As one poster on the site says:

If they default - WE'LL be handed the bill while they enjoy retirement at 55 etc etc. Merkel and Sarkosy will bend over backwards to keep the EU alive - and the Greeks are counting on it! They will have all their debts written off - and transferred to the UK and Germany. Then, Portugal and Italy will do the same - and why shouldn't they if Greece gets away with it? WE will be made to suffer while the bankrupt countries of the EU will carry on living the Ouzo and Olives lifestyle! Get Real! The Greeks know the power they have and are betting it all on not being allowed to fail - just like the banks!

What do you think? Is this true? Are we propping up other countries so that they can have a (relatively) nice time (eg) retiring at 55 whilst the rest of us have to grind it out till 65? Or is there something else going on here? I genuinely don't have a clue - I never follow this kind of thing normally.

Should Greece be allowed to go bankrupt? What are the pros and cons? If we prop them up, does this mean that Portugal and Italy will need to propped up in the same way?

And, are the other members of the EU morally obligated to do this anyway? After all, we are a union. So we should stop grumbling about it?

[Mad Tony]

Personally I think they should bring back the Drachma and then be let to default without any outside intervention. They got themselves into the mess in the first place and it's their job to sort it out. I think it's ridiculous how EU countries are just bailing them out every 3 months. The Euro is a stupid idea to begin with and I can't imagine why countries, especially France and Germany, wanted to join the first place. This was always destined to happen.

[StefanJ94]

Yes, it should. Because Greece is bankrupt ever since I know about it, which is since I was born so it's okay I guess.

[lara c. fan]

Originally Posted by Mad Tony

Personally I think they should bring back the Drachma and then be let to default without any outside intervention. They got themselves into the mess in the first place and it's their job to sort it out. I think it's ridiculous how EU countries are just bailing them out every 3 months. The Euro is a stupid idea to begin with and I can't imagine why countries, especially France and Germany, wanted to join the first place. This was always destined to happen.

Precisely. While you may get the whole "We won't have to exchange currencies!" thing with the Euro, it's a pretty terrible idea to have it spread out and used in a fair amount of countries.

[Dennis's Mom]

The Euro zone was under-built to begin with. It was a bad idea to have a common currency and not have unified fiscal policies.

[Bongo Fury]

Yes. Greece is a lost cause. After the nonsense that has transpired over the last couple of days – just put an end to this farce. Papandreou wants his referendum and to put the rest of us through the wringer for the next two months - no way. Times up. If Germany, France, et al are worried about their financial institutions, just bail them out directly and be done with it.

[Draco]

Bankruptcy is necessary at times. Avoiding it usually causes more long term damage.

[Cochrane]

First of all and slightly off topic, why do british people always link to the Daily Mail? Their reporting is so obviously biased crap that I half wonder whether it isn't satire. Yes, I know e.g. the Guardian is biased, too, but what about the BBC website? That seems fairly okay. And even if you do insist on a conservative slant, as I'm sure some here do, aren't there any actually good websites in that regard?

First of all, I think the EU is a good idea and we have a moral duty to help other countries that are members (Mad Tony: I know your opinion on this well enough, thank you). But I do think the current way people are trying to rescue Greece is just plain horrible.

From an economic point of view, I think it would hurt the rest of the Euro zone if Greece went bankrupt. I'm not sure how much it would hurt precisely. Greece does a lot of trade with the rest of the EU, but that has already slowed down significantly and so far we've been able to manage. The greatest risk would be the reaction of the markets, who are already beginning to be over-sensitive to changes in other countries.

I don't think there are useful alternatives either. Re-introducing the Drachme would still hurt the Euro zone, and more importantly, it would take time and money, both things that Greece does not have too much of. Re-introducing national currencies in all member states is obviously not going to work (at least not in the short term) - among other things, there are actually not that many coin and bill factories around.

The idea that our money will pay for a very nice time in Greece is cute and so unrealistic, it's funny. Yes, the people in Greece are all very happy about the austerity measures. The riots, protests and strikes are just their local way of showing that. And really, who doesn't like getting fired or transferred to a horrible job in a declining economy? Not to speak of cutting things like pensions. All old people I know are sitting around, going "damn, I wish my pensions were lower".

Whether Italy or Portugal need similar measures will be determined by economic factors. Nobody is going to shout "Oh, Greece is saved, let's stop saving money everybody!" (except Berlusconi, maybe. He is probably the most problematic factor in all of this). Just for comparison: Who of you is looking at that list and saying "I'm jealous of that!"? (Not counting conservatives who would not be affected themselves).


The huge problem I see is with the way this attempt to save Greece is being done. There is no clear concept, no common line everyone agrees on. Instead, it is just conference after conference after conference, with ideas being thrown around, then abandoned again. Considering the very different policies of Merkel and Sarkozy, I don't see that changing anytime soon, but it is not helping at all. The problem could have been a lot smaller if action had been taken right away, before the markets started getting as scared of anything hellenic as they are now.

I think a hair cut of greece's debt is absolutely necessary. In fact, I think it would be extremely stupid to do anything but. Greece's bonds are selling for 50% of their nominal value on the free market. If, say, the ECB simply bought a lot of them and then reduced its demands towards Greece (and, importantly, the base for the interest rate calculation), nobody would loose money that the banks haven't already written off anyway. Now our government is discussing something like that, but voluntarily and at extremely favorable conditions for the banks. Yeah, great idea…

[Mad Tony]

Cochrane, as a German, are you happy with your country continuously bailing out Greece in order to keep a failed experiment alive?

[Blackmoor]

Originally Posted by Cochrane

First of all and slightly off topic, why do british people always link to the Daily Mail? Their reporting is so obviously biased crap that I half wonder whether it isn't satire. Yes, I know e.g. the Guardian is biased, too, but what about the BBC website? That seems fairly okay. And even if you do insist on a conservative slant, as I'm sure some here do, aren't there any actually good websites in that regard?

LOl, you snob. Cochrane, please supply your list of approved sites that we British people may quote from!!

Remember this is being quoted here not to prove a point only to introduce a subject matter. In that regard bias may or may not be irrelevant, and may or may not be provocative - which often encourages comment.