Should the Europeans just let Greece default?
Kai Ryssdal: Officials from some of Europe’s biggest banks are going to have a tete-a-tete in Paris tomorrow. They’ll be talking about their most troublesome client: Greece. How to handle the second Greek bailout plan without actually making matters worse.
The ratings agency S&P said this weekend the deal that’s on the table would in fact be considered a default. But 18 months into this whole mess, there are reputable voices beginning to speak the previously unthinkable. Why not just let Athens go under and move briskly on?
From the European Desk in London, Marketplace’s Stephen Beard reports.
Stephen Beard: Greece’s European partners are bailing it out, but insisting on budget cuts and tax hikes in return. That deepens the Greek recession and makes it even tougher for Greece to pay its debts. There is only one way out of this vicious circle, says Tim Leunig of the London School of Economics.
Tim Leunig: To be honest, if I was Greece, I would get out of the Euro. I would default big time and would say to the rest of the world: ‘We’re sorry, we can’t take any more pain. You’re going to have to sort it out.’
But that would not be easy. There is — first of all — an overwhelming fear of contagion: that other heavily indebted Eurozone countries might follow suit. Jeremy Warner, an economics commentator with the Daily Telegraph.
Jeremy Warner: The worry is that if Greece goes, the next country will be Portugal, and then Spain and then possibly Italy, and then the whole thing would create the most almighty mess. It would be Lehman Brothers on steroids.
But he says this fear is exaggerated and that Greece should default and get out of the Eurozone to stop the contagion spreading to its European partners. Gabriel Stein of Lombard Street Research says Greece should leave the Euro for its own sake.
Gabriel Stein: The pain of staying in the Euro exceeds the pain of leaving, even though if they leave there will of course be lawsuits claiming that Greece should repay everything it owes but that’s the point of a default, you don’t repay.
But Stein, Warner and Leunig all concede that Greece and its partners will carry on muddling through. Postponing the inevitable, prolonging the agony still seem preferable to the vast uncertainty of default.
In London, I’m Stephen Beard for Marketplace.
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