Greece might be facing the worst financial crisis in history. In ekathimerini we read: "The Greek economy shrank 6.8 percent in 2011, leaving the level of output an estimated 16 percent below its pre-crisis peak. Unemployment has soared to more than 20 percent from 7.7 percent in 2008. Argentina suffered a 20 percent peak-to-trough drop in output as it defaulted on its debts in 2001, while Latvia's economy contracted by 24 percent because of the 2008 global financial crisis. With more belt-tightening in store in return for a proposed 130 billion euro ($172 billion) international bailout, Athens is on course to join their ranks, and possibly overtake them, said Uri Dadush, an economist with the Carnegie Endowment in Washington, a think tank. 'On the current path – which is not sustainable in my view – we may very well see Greek GDP go down 25-30 percent, which would be historically unprecedented. It's a disastrous crisis for them,' Dadush, a former senior World Bank official, said."
Greece has entered its fifth straight year of recession. Russell Shorto in the New York Times paints a grim picture of life there. "By many indicators, Greece is devolving into something unprecedented in modern Western experience. A quarter of all Greek companies have gone out of business since 2009, and half of all small businesses in the country say they are unable to meet payroll. The suicide rate increased by 40 percent in the first half of 2011. A barter economy has sprung up, as people try to work around a broken financial system. Nearly half the population under 25 is unemployed. Last September, organizers of a government-sponsored seminar on emigrating to Australia, an event that drew 42 people a year earlier, were overwhelmed when 12,000 people signed up. Greek bankers told me that people had taken about one-third of their money out of their accounts; many, it seems, were keeping what savings they had under their beds or buried in their backyards. One banker, part of whose job these days is persuading people to keep their money in the bank, said to me, 'Who would trust a Greek bank?' "
So how do we fix it? In a blog entry the other day, I said a Greek default would be best because there is no way they will be able to pay back the debt with the economy stuck in recession, and the government there not getting enough money to reduce the debt. Russia defaulted in 1998, and the world didn't come to an end.
Researcher Oliver Marc Hartwich says pretty much the same thing. "Realistically, Greece can only be saved if two things come together. First, Greece must default on most of its debt. A default in homeopathic doses, which seems to be the EU preference for now, will not suffice. Second, to carry its remaining debt burden Greece needs economic growth, which the country cannot achieve as long as it remains in monetary union with countries like Germany. In the long term, Greece needs to raise its productivity substantially. In the short term, a depreciation of its new currency is the best way to boost its external competitiveness. This is why Greece must leave the eurozone as soon as possible."
no comment untill now