Sunday, May 20, 2012

Wither Greece?

There is no question that Greece is a real mess, bordering on being a "failed state", but my hunch is that things will actually work out and they will stick with the euro and the "austerity" program. Yes, people voted to "say no" to austerity, but there is no real and viable alternative. And the rise of "leftists" who really only offer even scarier prospects for the middle class will probably cause a significant majority to "say no" to abandoning the one viable path to recovery that the EU is offering Greece on a silver platter. Sure, "austerity" is causing a lot of people a lot of pain, but recent reports strongly indicate that a lot of people do accept that the unacceptable is the wiser choice.
Ultimately, the EU may soften its terms and offer more aid, but only after Greece can prove that it will remain committed to sustainable fiscal reform. The great fear of the EU bankers is so-called "moral hazard", which means they are reluctant to give aid too quickly because easy aid will tend to persuade people that hard decisions can be evaded. This "make them sweat first" process is unfortunately the only way these tough fiscal problems can be solved in a sustainable manner.
Meanwhile, all manner of "experts" and commentators will focus on worst case scenarios while refraining from acknowledging much more likely and more positive scenarios.


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