So the tragedy is not only that the Greek debt crisis has no end in sight, but that instead of the one-for-all-and-all-for-one ethic that was supposed to govern Europe, the rancorous talks showed a roomful of national leaders with sharply differing conceptions of what to do about a bankrupt fellow member.
.. Germany and its allies have driven a hard bargain, but in forcing Greece to submit they have not resolved the crisis of the monetary union or advanced the European project.
Deal on Greek Debt Crisis Exposes Europe’s Deepening Fissures
The fact that today’s Greece bears little relationship to the country of Socrates or Pericles was simply ignored. And so was clear evidence, well-known at the time in Brussels, that the Greeks were regularly faking their budgetary figures to qualify for the euro.
.. For many in Europe, the euro’s economic benefits have been offset by the constraints it imposes. For the weaker economies in particular, it has become a sort of prison, limiting the ability of elected governments to use budgetary policy to smooth out the ups and downs of the economic cycle and eliminating their use of currency fluctuations to help manage national economies.
Why Europe Needs to Offer Greece Debt Relief
Greece’s debt-servicing costs are actually relatively low—lower than those of many other European countries. If the Greek economy could manage to grow at even a modest clip, it would have little trouble servicing its debt.
.. There has been a lot of talk of late about how “trust has broken down” between Greece’s government and its creditors. That sounds vague, but it refers to something quite concrete: the troika’s doubt that Syriza will take the necessary steps to insure that the country’s budget returns to a primary surplus and stays there. It doesn’t trust that the Greek government will improve tax collection, end the clientelism that has been characteristic of the country’s economy, or institute the structural reforms it thinks are necessary to improve productivity.
.. If you’re not convinced that the other side is trustworthy, you’re going to try to limit their scope of action as much as possible. It’s also one reason why Europe has taken such a hard line on further debt reduction: the bigger Greece’s debt, the more control Europe has over what Greece can do.
Professor Carmen Reinhart Analyzes Greek Financial Crisis in Congressional Testimony
A very conservative estimate would indicate that deposits have fallen by around 45 percent since their peak in 2009.
.. Whether investors become indiscriminate and pull out of other European periphery countries in the event of a Greek default still remains a risk. The likelihood of such a scenario, however, is mitigated by the fact that a significant share of sovereign periphery debt (particularly Portugal and Ireland) is also in official hands, that these countries have been recovering much more rapidly than Greece, and that in such an event periphery Europe would receive support from the center and from the IMF.