© Richard Timberlake
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Richard Timberlake
Professor Emeritus of Economics
Former Greek Prime Minister George Papandreou in his interview with BBC News said that Greece would not default nor exit the euro after agreeing to 130bn euro bailout. Do you share this optimistic view?
I do not have an optimistic view of any government in the world when the subject is 'Fiscal Responsibility.' Only when a government holds up a Constitution declaring that it cannot spend more than what is taxed in any one year, and lets the private sector manage ALL the welfare problems of that country would I find any optimism. In the present case, the Greek government must declare that every year's budget from now until Eternity will be balanced, and that it is turning all the welfare system over to private managers and private firms. Of course, such a change is too much for the welfarists who want to be retired when they are 45 years old, and lie on beaches for the rest of their lives.
Do you consider the second aid package a wise decision to save Greece from default as well as avoid aggravation of the EU crisis?
No. I think the bailout--any bailout-- is a bad decision. Nor does the Greek problem pose any significant threat to other sound European economies. Greece does not need to default. It can get its fiscal house in order if it can stop mob violence against fiscal responsibility. As it is, the bailout is an attempt to make the German taxpayer pay for the extended Greek welfare state. Not fair. The German taxpayer has to pay for his own welfare state. That's bad, too, but not as bad as paying for other countries' welfare states.
What other possible measures could have been implemented in order to help Greece?
Put some starch in the backbones of the Finance Ministers, so they tell their Greek counterparts to stiffen up. Welfare is not a 'free good.' Nobody can get Something for Nothing indefinitely.
Will Greece be able to meet the requirements of the rescue programme?
No one can tell. This question asks is there fiscal law and order in Greece. So far the answer is "NO.' But maybe the Greek people will wise up and realize what an impossible bundle their government welfare state is. There are no short cuts or palliatives.
How do you think the exit of the country from the EU might be a possible way out of the situation?
Exiting the EU does not matter. This problem is a fiscal problem for the Greeks. They can turn it around in a matter of days, or even hours, if they want to. The time it takes them to do so will take longer the more bailout money they get, and the more that other European governments hem and haw, thereby contributing to the ‘moral hazard' of the situation. The quantity of money that the ECB provides them is nothing more than diversion. This problem is not about money, it is about real product and real income being managed by political agencies that takes these real resources in the wrong direction.