Posted on 02/12/2012 6:29:48 PM PST by Hojczyk
Greece's grim trade-off: Impose deeper spending cuts or abandon euro and default on debts
Why would Greece accept more pain when unemployment is at 21 percent, the economy is enduring its fifth year of recession and rioters are hurling gasoline bombs in the streets of Athens?
Because the alternative might be worse.
Greek leaders are gritting their teeth as they move forward with a plan to further slash spending in return for a bailout of about $172 billion (€130 billion) from other countries in Europe and around the world. The Greek Parliament is scheduled to vote on the plan Sunday.
Greece is trapped in a lose-lose predicament: It must deepen an austerity plan begun in 2010 that will throw many more people out of work. Or it must default on its debts, abandon Europe's single currency and see its banking system implode.
"The choice we face is one of sacrifice or even greater sacrifice — on a scale that cannot be compared," Greek Finance Minister Evangelos Venizelos said.
Here is a closer look at Greece's two bleak options:
—Impose deep spending cuts in exchange for the bailout.
The pros:
Greece needs the bailout to make a $19.1 billion (€14.5 billion) bond payment due March 20. Prime Minister Lucas Papademos warned that "a disorderly default would cast our country into a catastrophic adventure."
(Excerpt) Read more at finance.yahoo.com ...
Another brain dead article written by a myopic idiot who is intellectually too lackluster to notice that Greece is not in trouble all by itself and that there not only are more options than the two presented...there is another option more historically likely to be chosen.
I don't believe there is a trade off at all, because both things are going to happen. If they make budget cuts now, it will cause further economic deterioration, their tax base will go down more, and they will default a little later. If they default first, they will be locked out of the credit markets for a few years, which means they will have to have a balanced budget, which means budget cuts. Both things are guaranteed.
If Greece were smart, they would default now (they will eventually) and also impose austerity. They need to get their house in order (austerity is required) but their international debts are a ludicrous burden.
In the end, everyone will default. It may be that going first will be an advantage in the long run.
Maybe both...
The first one to default will be in the best shape on the other side. "Sorry, guys, we are broke. We are cancelling all our obligations and printing a new currency. Thanks for all those loans."
I like Dennis Miller's statement — “...can't pay it back? Who cares.” Paraphrasing, of course.
Where is Kurt Russell? He needs to film “Escape from Athens.”
Http://confoundedinterest.wordpress.com
“They should offer up any assets as collateral. Assets like real-estate. If they default, then we own the island of say Crete.”
Better they do that and get to work actually producing some wealth or they’ll end up with nothing to offer — except possibly their women and young girls. It’s beyond me why people have such great difficulty with the concept of living within their means.
From what I can tell, the only industry in Greece is State sponsored welfare.
Europe doesn’t have enough spirit left to fight a war, i think they’d voluntarily euthanize themselves before they’d pick up a gun.
Whoever survives the coming crucible will be different from (and likely contemptuous of) the Europe of today.
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