By Abid Ali in
February 15th, 2010
Discipline in any team is important. Players pulling in opposite directions can destroy unity – we expect everyone to behave with some moral fiber. That’s why John Terry lost his England job. But what do you do with a country like Greece that actually lied about its debt problems?
It went as far as to hire Goldman Sachs to help it raise more money and keep that hidden from view.
So what should Angela Merkel and Nicolas Sarkozy do? Should they bailout Greece or kick it out of the union? Gordon Brown has been pretty clear: if Greece needs financial help then it should go cap in hand in the International Monetary Fund. But it’s easy for Brown to make such comments his nation is not part of the euro zone.
For Merkel and Sarkoszy it’s time for a bit of tough love to secure the credibility of the euro zone. They need to prove to the international community that political and economic unity can not be destroyed by one miscreant.
While they preach tough love they need to ask: would they be willing to take the same medicine? By asking Athens to slash its budget deficit from 12.7 per cent to somewhere close to the euro zone’s three per cent deficit limit, Greece’s unemployment rate would soar to above 16 per cent from almost 10 per cent now.
Merkel, Sarkozy and Brown are unwilling to withdraw the billions in extra money they’ve spent on rescuing their economies from the worst global recession since World War II. They know that would undermine the recovery. Greece can ill afford to take such draconian measures – but it has no choice.
Merkel and co need to put a lid on Greece’s trouble lest the international investors turn their attention to their national debts. The numbers are huge. What you are looking at below are debts accumulated by all branches of government and corporations. You may be surprised to see many Western European nations are among the top ten debtors – much of what you are looking at is the cost of empire.
United States-$13.45 trillion
United Kingdom-$9.08 trillion
Germany-$5.2 trillion
France-$5.02 trillion
Italy-$2.56 trillion
Netherlands-$2.45 trillion
Spain-$2.4 trillion
Ireland-$2.38 trillion
Japan-$2.13 trillion
Switzerland-$1.33 trillion
Source: BIS, IMF, OECD, World Bank
Even if the euro zone thinks it's great discipline to keep budget deficit at three per cent of gross domestic product – the debt keeps on accumulating. Someone at some time needs to pay it off. Europe’s economic growth will be anaemic at best. Where will the money come from in the future?
As for the United States, there's enough creativity in that nation to reverse its debt problems. Look at the Apple's iPhone as just a small example as a desirable product, then name a product from China that you would like to get your hands on?
Greece’s debt problems are a chink in the euro zone’s defences. At least John Terry can comfort himself knowing he lost the captaincy but hasn’t been asked to take a haircut -- he’s still being paid £150,000 ($235,413) a week.
http://blogs.aljazeera.net/business/2010/02/15/debtor-nations-greece-tip-iceberg
