I keep reading news about Greece’s fiscal crisis and keep wondering, what will be the outcome of the whole situation. I don’t really believe in ability of Greek government to clamp down on all public workers and squeeze out enough money to permanently resolve the debt problem. No way.
It’s like suddenly deciding to cut a third or more of your salary. Theoretically possible. Think about it — there was a time when we all lived on so much less. Sure, it probably was right after the school, the job was probably less than satisfying, and meager salary was barely enough to pay for a small rental place in a weird part of town. But it was (and probably still is possible). It’s just that since then you move into a bigger place, there’s mortgage, property taxes, family, credit card stuff, vacations, furniture and a gazillion of other things that you have now and wouldn’t want to live without after you got used to the conveniences and niceties.
Except in case of Greece there was no income increase. But there was a very convenient way to borrow against “future salary”. And they did. Have you ever seen public sector to say “no, we can live with current salary/funding, save the surplus”? Right. So, any “surplus” was immediately spent. And now, Greece has no choice but to default.
Honestly, what else could they do? They can’t devalue their currency, because they are in the Euro zone. They need massive amount of money, but even then they wouldn’t be able to cut enough of a budget to compensate. So, they will default, right inside the Euro-zone. And afterwards, it’ll probably be Spain.
Poor Germany. They got talked into this whole utopia of unified currency, and it seems to bring them nothing but trouble. Yes, France can help a bit, but it’s German economy that is the primary driving force behing the Euro. And what used to be quite stable and nice Deutsche Mark is now being diluted by other countries, that joined monetary union. And the more countries join union, the harder it will be for Germany — other governments don’t seem to be concerned so much with fiscal discipline and normal accounting. I suppose it was because of the Germany’s re-unification process — essentially Western Germany had to learn how to more or less absorb Eastern Germany into the system (I don’t know if that process is quite complete — last time I visited I was under impression that some people still felt isolated and “second grade citizens” for being from the East).
Would Greece exit the Euro zone because of its horrible mess of a budget and economy? No way. They managed to sneak into the club under false pretenses, so there’s no way they’d voluntarily decide not to use the perks that go with it.
Would the Euro zone government kick the Greece out? Also no way. Expect France and a number of other “interested” parties to sing the “well we created the zone to help each other out” song (even though it’s “to have Germany help each of us out” tune).
My only question is, would Germany be able to say “screw you guys, I’m going home”. And actually do it. I hope so. I’d be glad to be able to buy Deutsche Marks again. I wouldn’t care that to visit Germany I wouldn’t be able to use Euro — who cares, when credit card systems so easily convert currencies upon purchases of goods/services. And I hope Germans won’t have to pay for mistakes of other Euro zone countries. But it’s just a hope…