GHEI: Exit Greece, stage left
Doctors and pharmacists went on strike in Greece last week to protest planned spending cuts. These public employees are furious they may have to shoulder some of the burden of the austerity measures put in place to qualify the debt-wracked country for more European Union (EU) and International Monetary Fund (IMF) bailout cash.
If these self-serving civil servants get their way and Greece loses this $169 billion in funding, the nation could default as early as March. The Greeks would then have no choice but to pull out of the EU - and that might be the best outcome.
Later this month, inspectors from the EU, IMF and the European Central Bank will descend on Athens to decide whether enough of an austerity show has been put on to merit cutting the big bailout check. Among the proposals generating outrage is the elimination of the two extra months’ salary bureaucrats receive. (Yes, Greeks are paid for 14 months of work each year). The government must sharply reduce its budget deficit, and private bondholders must accept a cut of up to 50 percent in the face value of the debt they hold, though bond negotiations have been stalled for a while. Greece has $18.4 billion in bonds maturing on March 20, and the country cannot meet this obligation without a write-down and a second bailout. A Greek government spokesman admitted the country would have to leave the EU if it isn’t bailed out again.
The first $142 billion installment of bailout loans has, so far, kept Greece afloat, but Athens is no nearer a solution to its debt problem. Piling on yet more debt just makes things worse. The fact is Greece has never abided by the fiscal rules EU treaties imposed, and the cost of Greek mismanagement has been passed along to taxpayers not only of richer countries like Germany but also to poorer countries like Slovakia.
The right thing for Greece to do is abandon the European Union and give up the euro so it can return to the drachma. This move would allow Greece to devalue its currency to bring it in line with its true market worth, which would help restore competitiveness to its major industry - tourism - by making visits to the country cheaper. This is the path toward growth.
There’s no legal impediment stopping Greece’s exit from the EU. The Lisbon Treaty’s Article 50 lays out the process by which a member state can withdraw. An orderly exit is preferable to this state of uncertainty and evermore short-term fixes.
The EU would be better off letting Greece go so Brussels can focus on the bigger problems: Italy and Spain. Despite promises of austerity, the size of Spain’s government keeps growing, as does the yield on its debt. Madrid’s spending is up to more than 45 percent of gross domestic product. The newly elected government, instead of cutting spending, just introduced a raft of new taxes. More taxing and spending don’t bode well for the future of Europe, which is all the more reason for Greece and the EU to part ways.
Nita Ghei is a contributing Opinion writer for The Washington Times.
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