I am surprised how common it has become to talk about “Greece leaving
the EZ” or “Greece being kicked out of the EZ” or even “Germany leaving the
EZ”. As far as I know, it is legally impossible for any country to leave the
EZ, much less being kicked out of it. The procedure is that a country would
first have to leave (or be kicked out of) the EU and subsequently it would be
out of the EZ. And then it would have to re-apply for EU-membership, if it
wanted that. I would imagine that a country could probably leave the EU anytime
it wants to but to kick a country out of the EU would definitely require a
process, a process which will definitely take longer than 24 hours.
Suppose Greece repudiates all its debt and Greece is cut off from all
new funding (including funding from the ECB). That would not mean that Greece
would have to leave the EZ (among others because it couldn’t; see above). It
just would mean that Greece would be a bankrupt country in the EU and probably
could not pay salaries or pensions. It is not illegal within the EU to go
bankrupt.
To not be able to pay salaries or pensions is, of course, a nightmare
for any government but it is not a reason to lose one’s nerves right away.
First, a government can delay a lot of other payments before it has to delay
the payment of salaries or pensions. Also, the Greek government could pay
salaries or pensions with post-dated checks and thereby create something like a
secondary market for Euros. And so forth. There are no limits to creativity
when one is out of cash.
The most important aspect, in my opinion, is that the EU could probably
not get away with just sitting-by and watching how a member country can’t pay
salaries or pensions. If one were to bet that the EU would blink first, I would
consider that as a good bet.
None of that, of course, is a solution for the longer term. The solution
for the longer term, in my opinion, can only be something which incentivates
the economy to create new jobs; new jobs whose holders can afford a decent
living while still paying tolerable income taxes; where the employers can pay
tolerable corporate taxes and the owners can pay tolerable taxes on dividends.
Some believe that austerity, austerity and austerity will achieve this. I would
suggest that reforms, reforms and reforms will achieve that (and with reforms,
austerity makes sense).
I agree with your analysis, Herr Kastner. There is a lot of speculation right now, do remember that it sells newspapers!
ReplyDeleteThe real worry here is the EU itself, which has never shown itself a good policeman. Were it so, Greece would not have been allowed to get into trouble in the first place. The EU will muddle through somehow, the press will continue to scream "Germany!!" and Greece will continue to suffer.
This lack of ability - not unknown amongst bureaucrats - is accompanied by their lack of vision and lack of imagination. Both are essential if Greece is to get people working again. After all, it was the lack of insight by the EU bureaucrats that let Greece in in the first place because the figures they were given "looked okay". There was nothing to tell them that the facts had been manipulated. There was no headed notepaper from Goldman Sachs stating that a fraud had been perpetrated.
A bureaucrat looks no further than the piece of paper they hold in their hands. After all, those are the figures, the facts. How do you deal with things that aren't facts? They can't. Try explaining about imagination and you will run up against a brick wall of thinking pretty quickly in my estimation.
It is all part and parcel of the problem: they need facts to deal with a problem. The problem is that the facts only happen after the problem has happened. A bureaucrat has no weapons to deal with the oncoming crisis. Their response will be that it was impossible to deal with. They did not see the warning signs because they were not written down on paper: warning signs rarely are.
That many people are losing their livelihoods means nothing to them. After all, that is another department's job. It only matters to them when they find their own job is lost. They did not look for a job because they did not need to. When they come to look for a new job they will quickly discover that there aren't any being advertised for their position. That is when they realize that their unemployment cheque is post dated. That is when their electricity is switched off and there is no money to buy food anyway.
Just because it is not their fault does not mean that it does not hurt.