With Austerity Vote, Greece's Future TBD

After years of struggling through the global financial crisis, Greece has finally scheduled a yard sale to raise money. Instead of selling old hand-me-downs and VHS tapes for a quarter, the country is selling airports and gaming licenses.

The mass sell-off, along with job cuts in the public sector and raised taxes, is part of Prime Minister George Papandreou’s latest attempt to pull his country out of massive sovereign debt. This austerity package is an ultimatum laid down by eurozone ministers: If it does not pass, Greece does not get the 12 billion euro loan needed to pay its bills.

If the Greek government cannot pass this austerity package, the European Monetary Union should kick Greece out of the eurozone and force the country to bring back the drachma to fix its economic problems. This will send a clear message to other countries struggling with sovereign debt such as Portugal, Ireland, and Spain, so they, too, will not have the opportunity to bring down the euro. Under this plan, when Greece defaults and the country's stocks are reduced to junk status, it would not exacerbate the European financial situation.

Greece has not yet been able to implement essential reforms, conditions Papandreou agreed to for the 110 billion euro bailout from the European Union and the International Monetary Fund last May. This shows that the country is a far cry from being able to maintain a disciplined economy able to pull its own weight. Moreover, there is no need to feel guilty about forcing Greece to return to the drachma, as the country never actually met the strict requirements of the Maastricht Treaty to become a eurozone member and was never qualified in the first place.

Several words can describe Greece’s economy, but “stable” is not one of them. Whether fueled by the drachma or the euro, their economy has been a continual source of high inflation rates and frustration for citizens. At this point, a temporary exit from the eurozone would force Greece to use the drachma to fix their economic problems. Additionally, the embarrassment of being the first country booted from the eurozone could give Greece an extra push towards economic reform.

If Greece returned to the drachma, it could hyper-inflate the former currency and implement its own reform measures that would not be as strict as those of the EU and IMF. This is not a new concept for Greece, as the country has issued three different versions of the modern drachma to alleviate its economic woes. 

There would also be great potential for the Greek tourism industry to boom because the value of the drachma against other world tourism would be very low, and travelers could benefit from the exchange rates. This would bring in much needed cash. Theoretically, with reform measures over a period of time, the inflation rate would lower and Greece’s economy would stabilize.

Debt is not inherently bad; however, debt that you cannot pay back is. This is the lesson of the latest credit crunch and resulting global financial crisis. The euro was created as a concept to embody the notion of a single currency for a united Europe. Now, the euro is struggling to hold its dominant stance against the dollar, as failing economies of various countries lower its overall value. 

Greece is main weight on the euro’s back that continues to pull it down. If this austerity package is not passed, Greece should start dusting off the drachma.

Photo Credit: Wikimedia Commons

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Whitney Waters

Whitney Waters graduated from the University of Kentucky College of Law in May 2012, and is a member of the Kentucky Bar. She has a B.S. in Agricultural Biotechnology and a B.S. in Journalism. Her areas of interest include intellectual property, foreign, environmental, and social policy. She is currently a Intellectual Property Masters of Law candidate at The George Washington University and Presidential Management Fellow.

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