Lack Of Reform, Not Austerity, Doomed Greek Economy

IBD ^ | 01/28/2015 | Alvaro Vargas Llosa

[SeekAndFind]

The real Greek tragedy is not that Alexis Tsipras from the radical left-wing Syriza party won that country's recent election, becoming prime minister in the cradle of democracy.

Voters can reverse that mistake when they realize that his policies are doing more harm than good.

The real tragedy is that Greek voters, like other Europeans who are embracing far-right or far-left parties, cast their ballots in response to draconian austerity measures, imposed by the European Union (EU) and International Monetary Fund (IMF), that they equate with free-market capitalism and globalization.

The consequences of this ideological travesty will last much longer than Tsipras' honeymoon and prevent a solution to Greece's six-year-old recession for years to come.

Remember the sequence: After years of mercantilist corruption, crony capitalism and socialist welfare-state policies, a system that the center-right New Democracy party and center-left Pasok party upheld for 40 years, the Greek economy collapsed.

The collapse was catastrophic, with the GDP shrinking by a quarter in five years and unemployment hitting 25%.

Two bailouts by the EU, IMF and European Central Bank (ECB) kept Greece afloat and inside the eurozone, at a cost of 240 billion euros. In return, the Greek government agreed to raise taxes and cut spending, a self-defeating combination.

Little was done to reform the economy, ensuring that the Greeks would suffer deep pain without the benefits that a freer, more flexible and dynamic system of wealth creation might have brought them.

[circlecity]

"...cast their ballots in response to draconian austerity measures"

I don't know about that. At the time this was a big story the spending cuts announced did't seem very "draconian" to me or even "austere". No doubt the Greeks will have to again resort to stealing the bank accounts of its citizens. Anyone keeping their assets in a Greek bank are fools.

[Jabba the Nutt]

"Little was done to reform the economy, ensuring that the Greeks would suffer deep pain without the benefits that a freer, more flexible and dynamic system of wealth creation might have brought them."

You must FIRST give people a way to make a living. The only way to do that is cut taxes, cut regulations and radically free the economy. They you can start cutting government.

[Dr. Thorne]

The lazy Greek flunkies will follow anyone who promises them early retirement with pension, free cradle-to-grave healthcare and Ouzo.

[blueunicorn6]

So the EU couldn’t imagine that people might try to skate on their debts? Welcome to the real world.