LAMENTATIONS OF GREECE

“Frustrated with Greece’s inability to meet two years of targets for cutting the deficit and selling off state assets, donor countries are also insisting on more control over how Greece spends the money” screamed a recent prominent news item in the recent days (source bloomberg.com)

It is a very uneasy feeling when creditors breathe down the neck . In the case of companies, the owners suffer while the employees look for alternatives. If the company is large and/or the owners are smart they stack away most of their wealth beyond the reach of creditors.

But when countries are indebted, then the population suffers. In the case of Greece, the common currency has created a new kind of “financial apartheid”. The steps taken are plunging Greece into further indebtedness & discomfort. In fact the decisions are not taken for the benefit of Greece; but for France. To save French banks, Greeks suffer.

By 2020, the Greece debt/GDP ratio will exceed 135%.

Greece is in permanent recession ever since it declared in 2008 that its debt/GDP ratio is 120%.  Now the headlines say that by 2020 this ratio will be 129%! Greece is the only economy that registered a decline of 7% during 2011, when most other economies recorded better growth rates. By 2020, the Greece debt/GDP ratio will exceed 135%, if the economic decline at 7% continues!! The way the ECB and other fellow Eurozone nations treat Greece, that is bound to happen !!

Coming back, what are the negotiators doing? All the so called cuts are sham. There are reports that ECB bought the Bonds of Greece at deep discounts and now wants the value almost at par! Remember this is the European Central Bank and the equivalent of Fed Reserve. Can you imagine Fed Reserve is trying to make money out of the misfortune of a US State?

Currency Union without Political Union is the Joke of the Century

California was a bankrupt state in the US post 2008 Financial Crisis. Since political union and economic union was same, California got breathing space. However, the smaller and weak country like Greece is being stifled by larger players of Europe.

Taking a bold decision, by 2020, the Greece debt/GDP ratio will drop below 90%.

A better option is to follow Argentina of 2001. Possibly, a default in unavoidable!. But the choice of its former currency ‘drachma’ gives Greece much needed economic freedom to devaluate it to such a level where its exports become cheaper! Tourists will flock into the historic and beautiful country, its exports will shoot up in such a manner that the GDP will grow soon. Like Argentina it will be back to normal - by2020. And it will not be saddled with debt and low growth that will make its debt/GDP ratio 129%.

If Greece gets out of Euro by 2020, its debt/GDP level will much better position to the envy of Spain and other countries who still allow their monetary policy hijacked by those in Brussels, Paris and Berlin.

Greece should take a bold decision – Get out of EURO!