The Greek side was represented by Prof. Yanis Varoufakis who – most eloquently as always – cited the Eurozone’s faulty design as the principal reason why Greece is now effectively “in coma”. Steve Kroft suggested that perhaps it was Greece’s borrowing way too much; Greece’s being a fairly unproductive society; and Greeks’ not paying taxes which got the country into trouble. Prof. Varoufakis denied that. He said that these elements about Greece have always been around but they never caused a “coma” before. The “coma” was exclusively due to the Eurozone’s faulty design.
I would strongly disagree with that. One of the above elements has never been around before and that is the amount of debt which Greece could raise abroad. One could, of course, argue that Greece could only borrow so much money as a member of the Eurozone. Had it not been a member of the Eurozone, it couldn’t have borrowed so much and there would not be a “coma” today.
Obviously, no one can answer this question for sure but I would tend to disagree.
What started all the trouble was the lending frenzy on which virtually all international banks embarked. That lending frenzy was not limited to the Eurozone. A case in point would be Hungary where foreign banks made nearly unlimited CHF loans to the domestic banking sector so that those banks could make CHF loans to home buyers/builders. Foreign banks went so far as to advertise that borrowers would not need to submit financials because the only thing which mattered was the value of the property.
Thus, I would argue that Greece could have raised the same amount of debt outside the Eurozone as it did within the Eurozone. And that would have lead to the same “coma” which Greece is in today.
Obviously, loans are a joint responsibility of lenders and borrowers. Lenders were indeed “throwing money” at Greece (and other countries) and that is their responsibility. At the same time, the borrowing decisions were taken by professionals at Greece’s public debt management, at the Bank of Greece and at Greek banks. Those were people who knew what they were doing (or at least thought they knew). They turned out to have been wrong just like those investment bankers who once thought that one could convert 3 bad sub-prime loans into one investment grade loan.