February 24th, 2012


Bearing Gifts to the Greeks

So, what is the new plan vis-a-vis Greece? There seem to be two stories, which could be summarized thus:

a) the bail-out will keep the Greek government able to service its debt while it works to balance the books more sustainably, at least to the extent of reducing its deficit to the "manageable" figure of 121% of GDP by 2020.

The trouble with this story is that there are two sides to that 121% equation, and while it's possible to see the Government getting spending down further (though not without causing a lot of misery in the process), it's far less obvious how they're going to grow GDP at the same time. In fact, it looks like a race to the bottom. The economy of the Mariana Trench is perfectly balanced, but no one wants to live there.

b) The bail-out money is there to keep Greece ticking over for two or three more years, giving the rich countries in the Eurozone time to build up their own defences and loosen ties to Greece, so that the eventual effects on them will be less disastrous. In this scenario, the people of Greece are being made to suffer now, only so that they can be abandoned to their fate a little further down the line.

I wonder which is nearer the truth? Is there another interpretation?