Should we really help Greece?
It is a cruel question, but a very valid one.
For a start, Greece hascooked the books, and has misled euroland co-members when entering the euro. The country has not taken appropriate measures to clean up its mess, and lets things run out of hand. So why shouldGerman taxpayers helpa country that has misled authorities about its true state?
Furthermore, helping Greece would createhuge moral hazard problems. Spain, Portugal and Italy would feel sure that one day they could refer to this precedent. And what shouldIrelandthink? One year ago, the country took drastic measures to counter its problems. The result is not only an indication but also a strong example for Greece. Taking measures really helps, and the stress on Irish debt has eased since. The only valid solution for Greece, is the Irish route, this means tackle its own problems without outside help. Why did the ECB not applaud more the brave Irish policy?
Open Europe, a European liberal think-tank, has madean interesting piece of researchpresenting and analysing several scenarios for the Greek problem. They write:
Open Europe concludes that, taking all short term alternatives into account,EU leaders should either let Greece default, in order to avoid the moral hazard’ scenario which could impose even higher costs down the road, while also avoiding policies for which there is no popular support;or go to the IMF, which has the necessary experience in coming to the rescue of individual countries. This would also avoid the huge complications involved in cross-border transfers of money and establishing central EU economic governance.
Another thing is also often forgotten. Greece not only has a budgetary problem, but also a problem of competitiveness. Painful budgetary measures will only increase economic woes further. Therefore, leaving the euro would be for Greece, like cutting the dollar-peg for Argentina. A dramatic step, that could be accepted when problems grow further, and a fundamental solution becomes unavoidable.