Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

9e5f2b0046f86fa80bf84803_dr3490.jpg

Greek Lessons for Europe

Europe’s leaders – first and foremost Germany and France – must act quickly to defuse the Greeck crisis. Doing so will not come cheap, and therefore will entail substantial political risks, but, given a global economic environment that promises scant sustainable growth in the coming years, things could get very tough very soon for the euro zone if they do nothing.

BERLIN - “It’s when the tide goes out that you find out who has been swimming naked,” the legendary investor Warren Buffett aptly remarked when the global economic crisis hit. And, as we have found out in the meantime, this is as true for countries as it is for companies. Following Ireland, Greece is now the second euro-zone member to have gotten into massive payment difficulties due to the crisis, almost to the point of national bankruptcy.

Ireland was able to resolve its problems by itself, through a restructuring policy that was painful yet unflinching. It could do so because its economy, apart from its excessive debt burden following the collapse of an asset bubble, was basically sound.

The situation in Greece is different. A restructuring of the economy will be much more difficult, because it will have to be more far-reaching. The fiscal deficit must now be redressed resulted not just from internal financial imbalances, but also from a political system that for too long time has been in denial of reality, allowing the country to live beyond its means.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/EClocIB;

Edit Newsletter Preferences