After having followed the discussions and movements in Greece's sovereign debt crisis, there seems to be only a single option left - Greece must leave the Euro.
According to The Economist, although the consequences of a default might be less damaging than many commentators suggests, this weeks austerity plan is far from enough - rendering a future default or damaging restructuring very likely.
It seems the country has a fundamental problem with its economy and traditions. Europe has been shocked by stories of early retirement, pensions to the deceased and public railways loosing 5 times its income. The Greek public's response to the crisis and to the austerity plan supports the idea of a deeply rooted cultural problem.
It seems that these problems were not fully revealed, cleverly disguised by the eager contestant, when Greece was admitted into the monetary union. The Euro zone is hopefully equipped to deal with minor differences in culture and performance, but the runaway spending and poor performance surfacing in this ancient superpower does not fit.
Unless all euro countries agree to increase their spending and to raise inflation in accordance, the only feasible solutions is this: Greece must exit the Euro zone. This should be the long term attention of the crisis team. First, obviously, the funding and help must be put in place to avoid a short term default. Then a new currency should be introduced, and all debt converted. Although the value of the new currency, and that of the converted debt will quickly decrease, this will be safer and a more fair fate, than the currently inevitable restructuring of especially privately held debt.
The inflation imposed loss will still hit European banks, but not so much the ones in Greece, where the public bonds represents the largest percentage of banks' equity. Inflation will also improve the country's competitiveness, and bring hope of increased output.
Finally, the establishment of a grand plan and a final solution might be what's needed for the financial world to start looking forward and move on.
According to The Economist, although the consequences of a default might be less damaging than many commentators suggests, this weeks austerity plan is far from enough - rendering a future default or damaging restructuring very likely.
It seems the country has a fundamental problem with its economy and traditions. Europe has been shocked by stories of early retirement, pensions to the deceased and public railways loosing 5 times its income. The Greek public's response to the crisis and to the austerity plan supports the idea of a deeply rooted cultural problem.
It seems that these problems were not fully revealed, cleverly disguised by the eager contestant, when Greece was admitted into the monetary union. The Euro zone is hopefully equipped to deal with minor differences in culture and performance, but the runaway spending and poor performance surfacing in this ancient superpower does not fit.
Unless all euro countries agree to increase their spending and to raise inflation in accordance, the only feasible solutions is this: Greece must exit the Euro zone. This should be the long term attention of the crisis team. First, obviously, the funding and help must be put in place to avoid a short term default. Then a new currency should be introduced, and all debt converted. Although the value of the new currency, and that of the converted debt will quickly decrease, this will be safer and a more fair fate, than the currently inevitable restructuring of especially privately held debt.
The inflation imposed loss will still hit European banks, but not so much the ones in Greece, where the public bonds represents the largest percentage of banks' equity. Inflation will also improve the country's competitiveness, and bring hope of increased output.
Finally, the establishment of a grand plan and a final solution might be what's needed for the financial world to start looking forward and move on.
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