Greek Election Results: Greece Should Be Allowed to Default in the Name of Democracy, Austerity is Not the Answer
So the campaigning from the main political parties has finished in Greece and the elections will commence. People have been listening to the main arguments form the political parties and the dust is settling on their final rallies. The whole of Europe will be looking to Greece and wondering, not whether they can beat Russia in the Euro 2012, but whether Greece will stay in the euro zone.
The stakes can not be any higher, on May 2, 2010, the euro zone members and the IMF agreed on a €110 billion bailout package to rescue Greece. Not even a year had passed when a second bailout for Greece is agreed. The euro zone agrees a comprehensive €109 billion ( ($155 billion) package designed to resolve the Greek crisis and prevent contagion among other European economies. The saga continues with the people voting out the politicians who secured the bailout funds and creating the political instability within the Eurozone.
So why doesn't Europe allow Greece to exit? The people want their own sovereign state and believe that anything would be better than having to commit to the tough austerity measures that are attached to the bailout money. One of the sad statistics are the number of suicides in the country where the death note states that the financial crisis is to blame.
Greece is now thinking and doing the unthinkable, but the unthinkable might not be enough. The country has been singled out as being the most vulnerable link in the euro chain. Two large bailouts have already been received and the cuts run deep including jobs, salaries, pensions, public services, and spending reforms. The spiral of debt and recession needs to be broken.
If Greece were a household with a $25,000 income but a $200,000 debt then that house would have been able to declare bankruptcy a long time ago. Why won't the banks that financed all of the spending in the boom times allow Greece to default?
Let's look passed the obvious answers of bringing down the whole financial system to a more plausible theory. The euro zone was set up to enable the south to borrow money from the north and then to buy northern products. The Greek state borrowed money to support the public sector. Upon joining the euro there was a 100% to 500% increase in real prices, 25% increase in real tax, but a wage increase of only 10%.
Tourism and shipping are the two most important industries in Greece which makes it easier for companies and family businesses to operate outside of the main economy. When Greece was first downgraded and the banks fell a couple of points, the plug should have been put in place to prevent the spiral over the last two years. People have already started to take their money out of the country and buy property in a place like London for example.
Greece should be allowed to default and the people should wake up to that reality without being duped into thinking that more austerity is necessary for their own interests. By keeping Greece in the euro it seems that European citizens are being protected rather than the Greek people.