[NB The below may be considered a follow-up to my evaluation of the Greek drama in February 2010, which you may see here on Colin Davies’s blog]
The publisher of my bestseller ‘A Crowbar to Keynes’ wrote to me the other day (and that’s the first I heard from him since the royalties stopped flowing!) asking this simple but challenging question: ‘Now that all options are open again, Dr Mittington, what should be done about Greece?’
Forsooth a question worthy of a judicious reply! So I gave it some earnest thought, and this is what I concluded ought to be done about Greece.
Greece should leave the Euro-zone. This is both morally and economically justified.
It is morally justified, because Greece joined the common currency by doctoring the books; because they broke every rule in the manual of sound economic policy; and because they lied through their teeth for a decade to cover up their frauds.
Economically it is justified, because once on the New Drachma, the Greeks may devaluate, print money, set their own interest rate and negotiate their own debt deals; all of them things which are basic to any return to growth, and which within the Euro-zone they can no longer do.
People who know about such matters tell me that a gradual return to a national currency may be accomplished without undue catastrophe or trauma, by so-called ‘boarding’, i.e. pegging the New Drachma against one, or preferably two, stable currencies (e.g. the Euro and the Dollar) for a set amount of time, until the stormy waters have returned to their channels.
Others, who desperately want us all to believe that there is not, in the entire universe and for the rest of eternity, an alternative to the Euro, to More European Integration and to More Power For Unelected Beurocrats (guess who these people are?) will tell you that an exit from the Eurozone can only lead to catastrophe, disaster, war, pestilence and Armageddon. My answer is that such a scenario will only happen if we allow it to. And there is a way around it.
So as to make an orderly Greek transition from the Euro to the New Drachma possible, we will need to set up a full-fledged Marshall Plan for Greece. We will need to help them with bucketsful of money, mostly in the form of loans but also in the form of gifts. I will not lie to you: it will take hundreds of billions.
Oh, and now I can just hear all of you scream in furious indignation! But hold your horses and think a while. Giving them money is undeserved, you say? We should not throw our hard-earned cash at people who badly misbehaved? Well, for starters we are already doing so, and with results which are less than splendid, in case you have not noticed...
Secondly, ‘undeserved’ is a value judgement about the past, which should not be a yardstick for the future. The Germans, for one, really ought to know so. They themselves did not exactly behave exemplary between 1939 and 1945, did they now? Yet good old George Marshall and the American leadership nevertheless took the wise course at the end of the war, and spooned billions of dollars onto the German plate, so as to built up the war-torn country and give it a future. Yes, I am all in favour of justice and due punishment; but correct policy should be shaped with an eye to the future, not with a hunger for revenge. The latter we did in Versailles in 1919. And we got Weimar, Adolf Hitler and the Second World War as a reward for our wisdom.
My dear fellow Europeans: I know the Greeks behaved badly. But we allowed them to behave badly, so the responsibility is partly ours (and to a vast extend, incidentally, the blame lies with the Brussels Eurogues, who so far have not been called to any account).
Beyond that, we have a simple moral duty as human beings. No matter how undeserving the country, and particularly the political class of that country, it does not do that we, affluent Europeans, visit devastation upon the poorer Greeks, who are our continental cousins. Let us at least, by moral generosity which rises above the petty blame game, guarantee health care for the sick and reasonable pensions for the elderly. Let us make sure that the children do not go without food, shelter or education. Let us give their young folk some sort of future, and get the beggars off the streets of Athens.
This then is what wise leaders would do. Sadly, wise leaders are few and far between these days, particularly in the corridors of Brussels Palaces, where the perverse and the power-hungry go have dinner together to speak of ways to stimulate growth… I wish I could see the menu and the tab of that little Van Rompuy bash on May 23rd… I wish they’d be fed the evening meal of a Greek old-timer, or the dinner of an Athens beggar, harvested from dustbins…
Stop starving our poor!
Stop wrecking our democracies!
Stop repeating history!!
[Postscript May 13: for a similar view and a description of the mood in Greece, see this here article by Arianna Huffington]