Wednesday, 15 February 2012
To default, or not to default: that is the question
The above video from Bloomberg pretty much sums up the dilemma facing Greece. Former IMF functionary Miranda Xafa tells us that the unending economic crisis affecting Greece is the result of government failure to tackle vested interests – ‘a small vocal minority’, she calls them – and implement widespread structural reforms. Greece has no alternative, Xafa insists, but to accept the loans and terms of the troika. On the other hand, Yanis Varoufakis insists that the measures proposed in the new memorandum are ‘impossible’ and ‘unworkable’, and that the best way forward for Greece is to default within the euro.
Defaulting within the euro is now becoming the mantra of those opposed to austerity; but Xafa disputes the viability of such a strategy, claiming that if Greece were to default, the ECB would cut off funds to the Greek banks, which would collapse, ushering in a period of chaos and disorder in the country. Varoufakis doubts whether the ECB would cut off funds to the Greek banks, insisting that to do so would be an admission that the eurozone is disintegrating.