The news about the problems in Greece last week make the article "EU close to Greece bail-out deal, officials say" in BBC News catch my interest.
EU countries agree to aid Greece in case the country request for any help. Greece has faced severe problems of the huge government's budget deficit that exceed the limit of EU rule by more than four times that make Greece has no money to pay back her foreign debt that will meet the deal in the next couple month. The rescue plan is amount to 25 bn euros which may include the provision plan, and a bound issue guarantees by EU. This help is only from EU country mainly from Germany and France where the the people in the former is strong oppose to this help. EU officials state that the problem in Greece will make harm to the creditability of EU countries. For Greek, they has been strikes and protest due to the government try to solve the problems by issuing austerity measures.
The main reason that make Greece encounter difficult time is from lacking sufficient discipline in government's spending. When government tries to solve it such as issuing incresed tax collecting, cutting government spending that make people be upset that lead to domestic chaos. After a long period of making decision whether to help the Greece or not, EU finally makes decision to help Greece, eventhough a big country like Germany disagree to the aid. I think EU intense carefully considering pros and cons of the situation. If EU does not help Greece, the country would get into economic collaspe that tend to spillover to other countries among the region like the situation that occuring in the 1997 Asian Financial Crisis. This will make the regions get worse and spread to the rest of the world. At the same time, the rescue scheme for Greece will make the country lack resp0nse to her mistake and the situation might happen in the future. Therefore, the strict rules such as austerity's measure should be included to help reduce the budget's deficit in the future. I think it is difficult task for Greek government to reduce deficit without making people get angry.
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References
EU close to Greece bail-out deals, officials say, in BBC News
Retrived from http://bbc.co.uk/2/hi/europe/8565623.stm
Sunday, 14 March 2010
1 comment:
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I don't really know much about economics, but I do follow some economics issues because they are so important, and I'm obviously a fan of The Economist, as well as economics professors such as Steven Levitt and Dan Ariely.
ReplyDeleteMy interest in the Greek mess is that it seemed to me a good example of the dangers of allowing "good" intentions to violate both reason and justice. The supposedly benevolent intent was to help all by using socialist policies to redistribute wealth, which leads to problems when the value actually created does not keep up with the policy created money supply or debt, with the results we now see in Greece. (If I've seriously misunderstood the situation, please correct me.)
That's the result in practice which shows the irrationality of well meaning socialist policies, but I think that they are even more seriously flawed at the moral level: except in narrowly circumscribed circumstances, it is wrong for the state to take some people's property and give it to others, that seems to me to be stealing, even if it's done with the best of intentions. Perhaps more relevantly to the Greek example, the state does not have an obligation to pay for people's education, health treatment or other matters of personal responsibility.