Greece will default.
As much as it pains me to take such a negative view on my adoptive country, I am not the first person to make this prediction, nor will I be the last. I will stray from others, however, by not forcing all the blame on Greece’s shoulders – the Troika is slowly forcing Athens to waste away without so much as a thought regarding its welfare.
The Troika – the three-part committee consisting of the International Monetary Fund, the European Central Bank and the European Commission – effectively holds Greece by the horns in regard to its financial future. Without the approval of bailout loans by the Troika, Athens is at the risk of default, which, as everyone has told us, is a bad thing and could potentially cause the collapse of the eurozone. It paints a daunting picture, no?
It would, if Germany’s economic power in the eurozone wasn’t enough to help the eurozone weather the inevitable recession. It would, if the growing consensus was that Greece would irreparably implode upon itself without the euro infusion dangled in front of her by the Troika. The reality, however, is that Greece would actually be better off allowing itself to default on its debts and rejecting further bailout deals with its handlers. The question now is, “Why?”
It is not a secret that Athens’ management of its finances post-junta has been less than stellar. Constitutional protection of public sector jobs leads to excessive government spending. An inefficient and outdated records system begets rampant tax evasion. A culture of cronyism, nepotism and entitlement has flowed through the veins of Greek life for centuries. Given this knowledge, it would only be a matter of time before the jig was up.
One must realize, however, that the Troika is not interested in saving Greece in the slightest. The primary concern of the Troika is the stabilization of the euro and the solvency of the European Union as a whole – if that means casting off of one of its parts, so be it. It is this mentality that will ensure Greece’s inevitable default but only after Europe strips Athens of what little resources it has left.
Anyone worth his salt will tell you that the austerity measures imposed by the Troika are unsustainable. Athens is close to having sold everything but the Parthenon and, as a result, is well on its way to forfeiting any assets it could use to leverage its flailing economy.
The types of budget cuts imposed on Athens are more than its people can bear. The riots in the streets cry out that the Troika is starving the Greek people not only of their assets but their dignity as well. At the rate the Hellenic Parliament is slashing its budget to get the next small injection of cash, by the time the international community gives up on Greece, there will be nothing left of it – only a smattering of ancient ruins and the memory of a once-proud people.
The only way Greece can maintain its dignity is to self-destruct on its own terms by defaulting on its debts, exiting the eurozone and returning to the drachma. It will be painful; it will be messy. With no currency for comparison, a return to the drachma can result in hyperinflation and Greece could be in a potentially worse situation than before. On the other hand, there is the possibility Greece will flounder for a while, just like Iceland, before bouncing back.
Regardless of the potential outcomes, Athens is at a crucial juncture in its history – does it waste away to appease the Troika, or does it take hold of its own destiny? For their sake, I hope they choose the latter.