What to Do with Greece?

Article published on Feb. 10, 2010
Article published on Feb. 10, 2010
The pressure is mounting on the European Union to do something about Greece’s debt and fiscal deficit problems. The word “bail-out” is heard more and more often. Picture: Greece's Finance Minister George Papaconstantinou leaves a news conference in Athens February 9, 2010.
Credit: Reuters/Yiorgos Karahalis

Meanwhile the Greek public sector workers have gone on strike in the first major test of the government’s commitment to push through austerity plans.

But who can really “save” Greece? There are some options – a common EU approach, a unilateral bail-out by Germany, or an IMF-led bail-out. All approaches have their benefits and shortcomings.

However, I am much more interested in the conceptual debate – why did the crisis happen in the first place, and what can be done to prevent such future crises.

greece_strike.jpgOne of the reasons for the crisis is the poor quality of the Greek financial statistics. There is some evidence that Goldman Sachs has helped the Greek government hide (???) in 2002 an additional 1 billion US dollars in debt. I find this scandalous and unacceptable, and a proper investigation should be carried out.

But Paul Krugman goes further and says that the only way forward is fiscal and labor market integration. I agree. From a conceptual and systemic viewpoint the current arrangement of the eurozone is quite vulnerable. I also tend to know that such integration seems unthinkable in many European capitals today. Maybe the Greek experience (and the Spanish, and the Portuguese, and perhaps more) will teach us to be practical.