Sometimes the right thing to do is the wise thing. That is the case now for Greece. Done correctly, debt reduction would benefit Greece and the rest of the
eurozone. It would create difficulties. But these would be smaller than those
created by throwing Greece to the wolves. Unfortunately, reaching such an
agreement may be impossible. That is why the belief that the eurozone crisis is
over is mistaken.
Nobody can be surprised by the victory
of Greece’s leftwing Syriza party. In the midst of a
“recovery”, unemployment is reported at 26 per cent of the labour force and
youth unemployment at over 50 per cent. Gross domestic product is also 26 per
cent below its pre-crisis peak. But GDP is a particularly inappropriate measure
of the fall in economic welfare in this case. The current account balance was
minus 15 per cent of GDP in the third quarter of 2008, but has been in surplus
since the second half of 2013. So spending by Greeks on goods and services has
in fact fallen by at least 40 per cent.
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