Quote:
Originally Posted by Damien
Because they ran out of money. Even if they did start a new currency, promised it's value and started paying people with that they still would have had the situation where their outgoings were vastly higher than the money coming in. Changing currency wouldn't fix that. I also question how well it could work if the Drachma isn't worth anything internationally, people could have tried to deal with dollars or pounds.
Greece's fundamental problem was surely utterly incompetent economics which were only made worse by an inability to control their exchange rate but were not caused by it? They had a large state, pensions and they weren't too fussed about collecting tax.
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Damien, this really is naive ...
The "club med" countries have had ramshackle economies pretty much forever. The clue was in the number of zeroes on their low-value indigenous banknotes, because these were evidence of repeated devaluation and money-printing, which is what you do in lieu of actual competitiveness as your international rivals outstrip you. You can't get your unit labour costs down through efficiency, so you get it down by making your country a cheaper place in which to do business.
These economies should never have been allowed into the Euro because they never ditched the loose attitude that required periodic devaluation. Now they are in, they have lost unit labour competitiveness against the industrious north (principally Germany) but they cannot devalue to make themselves competitive again because they share the same currency as the industrious north. While times were good, of course, they had a means of escape via cheap credit, far cheaper than they were ever allowed access to pre-Euro. That credit simply gave them another reason not to sharpen up their tax and spend policies.
The upshot is, if Greece had nevere entered the Euro, ERT would not be getting shut down today. The country would not be crippled with debt, the currency would not be over-valued because the Greek government would have taken steps to correct it long before now and the short-term damage to the economy that causes, through expensive imports, would even now be being ameliorated by large flows of tourist cash in Sterling and Euro as foreign tourists were attracted to a relatively cheap holiday in the sun (when you have to pay in Euros, Greece really isn't the good value holiday it was 20 years ago).
If ERT was a problematic Drachma money-pit then that would be addressed by planned reforms and efficiencies, not by the sudden, all-but-unannounced closure of a part of the state infrastructure. That you have come to see this "solution" to ERT's problems as in any way unremarkable, or reasonable, simply goes to show how bad things have become and for how long.
Let me repeat: a country with any degree of control over its own finances does not entirely shut down an entire section of its own state apparatus with less than 24 hours notice.