It has worked out exceptionally well for Argentina.
Greece is probably now close to the bottom of its economic slump, which started six years ago. Between 2008 and 2013 real GDP shrank by 23.5 per cent and investment by 58.4 per cent. The most recent labour force survey showed unemployment at 26.7 per cent in January. The rate of youth unemployment in 2013 stood at 60.4 per cent. Bank loans to businesses were down at an annual rate of 5.2 per cent in February. Non-performing loans have reached a level of 38 per cent of the total. Bank deposits are shrinking.Varoufakis explains some particular reasons why it's a problematic route for Greece to attempt in Greece’s Grand Decoupling, the Nuclear Option and an Alternative Strategy: A comment on Münchau 03/14/2014:
More shocking than those relative changes are statistics that put the data in perspective. Yanis Varoufakis, a Greek political economist, recently produced a long list, of which I found the following most striking: of 2.8m Greek households, 2.3m have tax debts they cannot service; pensions are the main source of income for 48.6 per cent of families; and 3.5m employed people have to support 4.7m unemployed or inactive people. The Greek economy is not in recession. Nor is it recovering. It has collapsed. [my emphasis]
The Grand Greek Paradox of the day, meaning the impressive rise in the assets of a nation more bankrupt than ever, is neither that grand nor that much of a paradox. There is, indeed, a simple reason that international investors are piling in to buy some of the nation's paper assets (e.g. the freshly minted government bonds and shares in some banks), even though the country is economically kaput and its government is steeped in long-term insolvency more than ever. What’s this simple reason? The short-term decoupling of the value of paper assets from Greece's real economy. [emphasis in original]The Eurointelligence Blog summarizes the discussion with Should Greece default? 04/15/2014. They also cite Klaus Kastner, Should Greece Default Now? Observing Greece 04/14/2014 and Greek debt scenarios: “Great stretch” or “time to default”? Keep Talking Greece 04/14/2014. The later speculates about whether there might be a German government push going on to tempt Greece into a default.
Varoufakis explains that he is in basic agreement with Münchau on Greece's current situation. Their difference are how to pursue the necessary confrontation with Angela Merkel's Grand Coalition government in Germany to get Greece out of the catastrophic austerity trap imposed by the Herbert Hoover/Heinrich Brüning economic policies to which Merkel and her SPD coalition partners are current committed:
Wolfgang Münchau and I are in agreement on the current situation: Greece’s economy is kaput and the German New Bubble strategy for reviving the country is certain to produce decades of unnecessary misery. Moreover, Berlin and Frankfurt will never concede changes to this New Bubble until and unless Athens confronts them. The question is: What type should this confrontation take? Münchau considers the nuclear option of exiting the Eurozone. I submit that there are 'conventional' weapons that can do the trick of shifting Germany away from its current position of irrational intransigence. Or forcing Germany to take itself the political initiative of dismantling the Eurozone. In this sense, Greece has no reason to volunteer to take the blame for the common currency’s fragmentation as long as there are legitimate and legal moves with which to confront Berlin's and Frankfurt's intransigent position within the Eurozone.Tags: angela merkel, austerity economics, eu, euro, european union, greece