Greece is as Sick as Ever

Tony Barber writes for the Financial Times:

In May, Greece will start its eighth year as a patient in the hospital for financially wounded eurozone countries. Having joined Europe’s currency union in January 2001, and having received the first of three rescues worth a combined €260bn in May 2010, the country is on course for a fourth aid transfusion next year. Barring wholly improbable changes in the politics of European crisis management, Greece will earn the unwanted distinction by late 2019 of having spent more of its eurozone existence in an intensive care unit than outside.

In an address on Saturday to his ruling Syriza party, Alexis Tsipras, prime minister, described Greece as “making sacrifices in the name of Europe”. He spoke as if Greece were some invalid suffering not for the sake of regaining his own health but to improve his doctors’ reputations. These are the eurozone and International Monetary Fund consultants who bicker at Greece’s bedside over what treatment to prescribe next....

[T]he question is whether the eurozone-IMF rescue programmes have helped to modernise the Greek state. All the creditors, and many of the country’s politicians, are doubtful. Tax collection rates have actually fallen since 2010, despite efforts to strengthen the tax system. “The state of the [public] administration and of the health, education and justice systems is worse than at any time in the recent past,” says Yannos Papantoniou, a former finance minister.

Greece’s paralysis is set to continue as long as eurozone creditors refuse to grant Athens extensive debt relief, yet refuse to bite a different bullet by letting it drop out of the currency union. The lack of a decisive push in either direction creates just enough space for Greece to do the minimal amount of reform required to keep aid flowing.

In this sorry state of affairs no one is a winner, and certainly not the Greek people.

Greece should have defaulted on its debt years ago, ditched the euro for a return to the drachma and dumped the onerous regulations that suffocate the economy. 

This remains the best policy move. Full out, Ludwig Erhard.

-RW