European Debt Crisis

A professor’s perspective: How did Greece get here?

Jeremy Hobson Jun 12, 2012
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European Debt Crisis

A professor’s perspective: How did Greece get here?

Jeremy Hobson Jun 12, 2012
HTML EMBED:
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Jeremy Hobson: Well The sugar high from that Spanish bank bailout we told you about yesterday has worn off. Global stock markets have turned their attention back to Greece and its elections this weekend that could lead to a Greek exit from the euro.

For a Greek perspective, we’re joined by Dimitris Doulos. He’s an economist at the American College of Greece outside Athens. Good morning.

Dimitris Doulos: Good morning.

Hobson: You are economics professor, you speak to economics students — how do you tell them that Greece got into this position, and how will you teach about avoiding situations like this years from now?

Doulos: I have been saying that we are going to reach this point for the last 10 years because it was something that every economist could see. We were a country that, we produced less than we consumed. It’s also a social problem — from a country that worked hard, we have become a country of social servants, and a private sector that depends a lot on the state. So, to preserve such a large state, you have to pay a lot of taxes, and that creates excessive spending and that creates deficits and debt. And, tax evasion, by the way, is another very important problem in Greece.

Hobson: How do you fix that problem — you’ve got a lot of people working there who aren’t paying any taxes at all?

Doulos: I would call the IRS and fix it, to be honest with you, that’s the best way to do it because there’s no political willingness to do it. Only those that are on pensions or on salaries pay taxes and nobody did anything because they did not want to take the political risk to do something.

Hobson: Do you think that the United States and the other power centers in Europe have done a good job handling the Greek crisis from the outside?

Doulos: Well, I don’t think that the U.S. can do a lot about it, but at least President Obama is giving some advice and encouraging the Europeans to take quick action. And the U.S. example in the recent crisis, the quick action of the U.S. government and the Federal Reserve, are very good examples. Instead, the Europeans did not react quickly and they let the problem grow and grow with Germany probably being the reason and that is why it is at this time.

Hobson: Let me ask you one final thing, we’ve got this big election coming up this weekend — are you scared?

Doulos: Yes, yes I am. But despite what the left wing party is saying, I don’t think that they can do what they are saying they will do if they come to power. They don’t have a lot of choice. I think they realize the consequences of what they are planning to do and will back down — they are not going to do it.

Hobson: Professor Dimitris Doulos is an economics professor at The American College of Greece. Thank you so much.

Doulos: Thank you very much.

 

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