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what would a similar proposal for Greece look like? Is there anything that Greeks can do to avoid this neolib hell we're experiencing? Apart from mass protests civil unrest and general havoc that is...

Ireland is unique among the PIGS in that it has a structural balance of payments surplus, and that its goverment debt is unsustainable mostly because of the ill-conceived blanket guarantee of their failing bloated banks. They would have had a large deficit in 2009 in any case due to the recession, but without several multiples of GDP in zombie banks liabilities the Irish treasury and central bank would likely be jointly solvent.

I think Greece has only the nuclear option left: sovereign default and issuing scrip. But maybe that's a failure of my imagination.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Feb 4th, 2011 at 06:09:06 PM EST
[ Parent ]
Yes and the 1 trillion Euro question is: in the medium and in the long run, is the nuclear option better or worse for exactly the people you want to protect - compared to following the road of austerity and "reform" (which will lead to a default managed by the debtors at some point anyway)? Does just sitting and hoping for an electoral change of guard in Germany and France in the next couple of years even make sense?
Or is cutting general income levels in half but preserving their public nature, taxing property and assets and prosecuting tax dodgers among other things, a better option on a 5 or 10 year horizon?

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Fri Feb 4th, 2011 at 06:19:09 PM EST
[ Parent ]
I actually think it is. Sovereign default doesn't imply an exit from the Euro, and if the money markets close down to Greece as a result and the European System of Central Banks temporarily stops clearing payments with the Greek Central Bank they pretty much force you to issue scrip to keep functioning, institute capital controls, or other emergency measures suspending parts of the EU rules. You can always pay any fines imposed by the European Court of Justice a decade later, when the economy has recovered.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 4th, 2011 at 06:39:00 PM EST
[ Parent ]

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