The Greece and Eurozone Crisis Made Simple
One can go into long convoluted explanations but, as I see it, there are two basic problems, one leading into the other. The more superficial problem is that in a single currency zone without the option of devaluation purchasing power will drain to the more competitive countries. To continue buying in the common currency people, companies and governments in less competitive (and poorer) countries have to borrow but this is a temporary solution for the obvious reason that they must pay back with interest so pretty soon borrowing makes this problem worse.
At that point the rationale of the common currency zone is stuck in an unresolvable dilemma. All the twists and turns have merely been “kicking the can down the road” – and each time the problem re-surfaces it is bigger and more threatening. What does “kicking the can down the road” mean? It means borrowing more in order to pay back the last lot of loans.
What makes it a little bit confusing is the way that the debt gets transferred from agency to agency at each can kicking stage. What has basically happened is that the other European states have wanted the Greek state to be turned into a debt collecting agency on behalf of the Eurozone governments and for the IMF. A key problem here is that the Greek elite does not actually pay taxes – they have taken their money and everything moveable to Switzerland or places like the London property market. Like the rest of the global elite they too believe that “only the little people pay taxes” and by now the little people have been ruined. The other option is to sell off the public sector to the creditors. However the Greek people have now elected a government that says that they can’t pay – a government that does not do what it is told by the creditors and whose finance minister did not wear a suit and a tie.
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