Submitted by Walmartpancake t3_zx7mc7 in explainlikeimfive
tiredstars t1_j1z0b08 wrote
Reply to comment by Bomboclaat_Babylon in ELI5: Why can’t we have a universal currency? by Walmartpancake
This is really not true, for Greece at least. Greece's economic policy and performance pre-financial crisis certainly wasn't great, but it wasn't shocking. Post financial crisis, it had a disastrous economic policy imposed on it, known as "extend-and-pretend" - keep giving temporary relief for debt, insisting on public spending cuts (which tanked the economy further) and pretending that things were going to work. This was so disastrous (both for Greece and the eurozone generally) that the IMF, of all institutions, ended up coming out in opposition to it.
Exactly why these policies were imposed is a bit more complex than "German bankers" and links to institutional design and politics in the EU. Though "German bankers", and the reluctance of Germany to admit to how exposed its banks were to the financial crisis, is part of it.
Bomboclaat_Babylon t1_j1z1kzv wrote
Greece runs a bad economy. Full stop. They have too many state owned enterprises. Too much red tape. Too many social programs. And guess what? They had to ask for money because they ran the economy into the ground. If you ask for money, the lender has to believe they can get it back, but the EU didn't even believe Greece could ever really pay it back. They have given tons of free money and relief over the years and the Greek government knows they'll keep getting free money. In return, ya, they have less clout and the major economies look down on them, and make demands. Demands they couldn't make if Greece fixed it's economy and became an asset rather than a liability. Both Italy and Greece are run by the older voting block that demands free money and services for old people that they can't cut off / are unwilling to cut off. So they keep voting for anyone who says they can keep their defunct economies doling out money when the only way to do that is to keep borrowing. So the lenders then say well I'll give you money if you do XYZ to fix your economy so we think we can at least get something back. But then they don't do it and the politicians point at Germany and Euros for all their political problems as a scapegoat. If Greece had it's own currecny it and left the EU it would have been bankrupt already decades ago. When they joined in 2001, the USD to GRD was 1 to 320. As soon as they joined the EU there was a boom in confidence (because they were now backed by Germany and France and the UK), and then they started spending like crazy and haven't stopped. They need to make major changes to their economy, but it's not politically expedient. So they take money and blame the EU. You don't want strings attached? Stop borrowing money and fix the economy.
Viewing a single comment thread. View all comments