“Greece cannot pay off its debts when it is shutting down its economy. It has to put people back to work”.
And the sentence following the above I consider the most questionable one:
“The only way forward is through more debt write-offs and more low-interest European loans, as well as by opening up restricted job markets”.
Even if all of Greece’s debt were forgiven, it wouldn’t change much in the functioning of the Greek economy. If all restricted job markets were opened up overnight, it might change something but I would only believe it when I saw it.
Either way, the Greek economy would continue to be an economy which does not generate enough value to justify the standard of living which Greeks justifyably desire. There simply is not enough domestic production to satisfy a greater portion of domestic demand (making horrendous imports necessary and underutilizing domestic resources) and there certainly is not enough domestic production to generate the amount of exports necessary to justify the desired imports. And with all that underutilization of resources, chronic unemployment cannot be avoided.
Thus, I return to the ‘early promising signals’ which I have described in a previous post. A better future for Greece can be expected when the following sentiments are felt throughout Greek society:
* an obsession with import substitution
* an obsession with export expansion
* an obsession with making tourism/shipping competitive
* an obsession with private foreign investment; and, last but certainly not least:
* an obsession with the EU Task Force to do everything possible to modernize Greece’s public administration and to make Greece a governable state
If and when that happens, the issue of a debt write-off (which may still be necessary) will become a side issue. Creditors have already accepted the fate that existing debt must be considered – to a large extent – as ‘spilled milk’. The difference is that foreigners (creditors and, above all, investors) will be happy to transfer Fresh Money to Greece because they can have the confidence that the money is well spent.