Is it understood that whenever some Greeks import SUVs, what happens in reality is that the foreign debt of ALL Greeks is increased for the benefit of those who can afford to import SUVs?
Is it understood that whenever some Greeks withdraw their savings from banks (either to hoard them under pillows or to transfer them abroad), the foreign debt of ALL Greeks is increased for the benefit of those who have savings?
The Greek economy depends to a large extent on funds flows from abroad. The trick is: funds flows from abroad come to Greece either via the state as a borrower or via banks as borrowers. When the state is the borrower, it is clear that ALL Greeks are liable for that debt. When banks are the borrowers, it is de facto clear that – if worse comes to worst – ALL Greeks will be liable for their debt.
Wouldn’t it be the most natural thing to take measures that those policies which serve the interests of some members of society (at a cost to ALL members of society) are reigned in?
The answer to that would be import restrictions (such as special taxes on certain imports) and capital controls. Wow, I can already hear the uproar from free trade enthusiasts that this would be a return to the stone age of commerce! I can hear how that would be a violation of EU-treaties! Actually, I am a free trade enthusiast at heart and, actually, I am a believer in the observance of treaties.
It wouldn’t be a return to the stone age of commerce! I would simply simulate the situation which Greece was in before the EU-freedoms and before the Euro. Everything which was imported then was taxed so high that those who could afford to import were making their fair-share contribution to society via taxes.
Am I recommending a return to no-free-trade-policies? No way! But I AM recommending some breathing space. Breathing space for an economy to regain its bearings.
There is simply no chance for an economy like that of Greece’s to regain its own bearings when two killer-apps (freedom of products and capital flows) are eating away at the economy’s substance! No economy in the world can survive if its production and its financial capital are withdrawn!
Ideally, free market forces would accomplish that. Greece would deflate so much that production and capital return. Well, I invite free market dreamers to think that way; it won’t happen. Those who are really interested in free markets long-term (like I am), first have to create the conditions that free markets can work effectively for society as a whole!
Now, here is a conditio sine qua non if one were to pursue a policy as suggested above. It would have to be clear that those are only temporary measures to allow the Greek economy (via infant-industry-protection) to eventually reach its own competitive level. If that were not assured, it would indeed be a return to the stone age of commerce!