New Blog/Greece

I've decided to revamp the entire blog to better reflect my current interests.

"When I was a child, I talked like a child, I thought like a child, I reasoned like a child. When I became an adult, I put childish ways behind me." 1 Corinthians 13:11

What's happening on my birthday? Well, May 6 - Probably a general election in Greece, called by Lucas Papademos. Will a new leadership really bring a new idea, a new dynamic to this horrendous problem? I believe in the power of leadership, but here I think at least in the short term, a change in leadership may not bring relief. Really, elections in France, Germany and Greece actually may impede continuity of the negotiations currently taking place, as it has the potential to change the players at the bargaining table and cause delays in the process. Inherent problems remain.

I see the budget cuts as really an attempt at saving their way out of a crisis. With all these budget cuts, less capital investment and unemployment crimp growth, lowering tax dollars and making it even more difficult for Greece to cover its interest payments. Credit deteriorates and interest rates skyrocket, and the vicious cycle continues. To sidestep this, you have to grow your way out of crisis - ie loosen fiscal and monetary policy, just as the US is attempting to do.

Yet I cannot see the Eurozone and IMF giving unconditional aid to Greece. After all, especially for the case of Greece, irresponsible government spending was what precipitated the crisis to start with. Encouraging such behavior encourages moral hazard and also costs votes back in the donor countries.

I think neither cutting spending nor encouraging profligate growth are answers. To be sure, there is no easy answer. Perhaps certain industries, deemed as more likely to have higher growth prospects, should be nurtured at the expense of the incumbent industries which have less stellar future growth forecasts. Structural unemployment will probably remain high for a while as the people retrain, but at least this may be a way to create hope for the future.

Of course, to put things in perspective, Greece is only a small part of the Eurozone GDP - they can bail them out whatever the problem. And they should bail him out without too many near term demands. Do you kick someone when he is down? No. Save him first, talk terms later. Of course you don't give a drunk gambler money unconditionally, since once he loses it again its really your own fault. You fund him as you first send him alcoholics anonymous, help him get a job, get his house back in order and then when he's in better shape, then you ask him to pay back.

Structural unemployment sounds like just a blip on the radar, but in the absence of financial assistance to affected individuals, I can imagine for example, potential university students missing out on the chance to get the skills that will forever impact their future lives. I think there must be due consideration given to such issues.