Wednesday, January 11, 2012

The Greek Collapse

I'm glad I don't live in Greece:
Unemployment has surged to 18.8 percent from 13.3 percent only a year ago. Overburdened public hospitals are facing acute shortages of everything from syringes to bandages because of budget cuts, with hiring freezes forcing the mothballing of operating rooms even as more unemployed are relying on the public health system. Rates of homelessness, suicide, crime and HIV cases from intravenous drug use are jumping.

Greece has been forced to cut spending and raise taxes in the middle of a severe downturn, slashing pensions as well as state salaries, jobs and services. As public confidence has evaporated, consumer spending — the biggest driver of the economy — has plunged, generating cascading losses at private firms. The result is a dizzying economic plummet and social crisis that is bringing the cradle of Western civilization to its knees.

“Conditions have deteriorated so dramatically that doctors in this country now believe that the Greek crisis is no longer just a financial crisis but a humanitarian crisis,” said Dimitris Varnavas, the president of the Federation of Greek Hospital Doctors’ Unions.

If Greece had its own currency, that currency would have plummeted in value, and the country would now be full of northern Europeans coming to scoop up bargains in travel, vacation homes, etc. Greek olives, olive oil, wine and cheese would be so cheap they would flood out into the world market. And eventually this would stabilize the economy.

But Greece is under the Euro, and that means their currency can't fall. So Greece has not become a bargain and their exports remain expensive even as their economy collapses. Nobody knows how this can be resolved because it has never happened before.

I think the Greeks need to get out of the Euro now.  They have dug themselves into a terrible hole, and it will be painful to get out whatever they do, but at least outside the Euro they have more control over their own destiny.

No comments: