An American’s View Of The Greek Crisis

Last Updated: 16 April 2024

I know that there’s no method in place to do so. But come on, you should be able to figure that out. How about implementing this rule: If you lie about your books and break European covenants on debt and spending, you’re out. That would do it.

Seems like Greece broke its promises, right? There should be consequences.

Besides, as you suggest in your blog, Paul, we all know how the Greek tragedy ends. Even if Germany takes a deep breath and agrees to the bailout package, and even if Papandreou manages to shove through harsh austerity measures amidst the rioting, chaos and tragic deaths in Greece, it’s clear as day that we end up right back where we are in another year or two.

Earlier this morning, you asked me how Greece looks to an American. Without being an expert, here’s what I see:

  • I don’t trust the Greek books. I’m guessing the hole is bigger than we are aware of, and the required bailout bigger than the US$140 billion being talked about today.
  • I don’t believe Greece can push through the austerity measures it truly needs to get its house in order. The population will not bear it. The measures passed so far do nothing to reduce Greece’s long-term debt, which is still scheduled to rise. They merely slow the pace. And I don’t blame the Greeks: the required concessions and adjustments are simply too large.
  • Meanwhile—and critically—it also seems painfully clear that Germany and other bailout nations will not bear a second Greek support package. The window is only open once for Greece.

So in the end I see the bailout package as good money being placed after bad. It merely postpones the inevitable, which is that Greece will exit the Euro, default and devalue, and go into an economic funk lasting 5-20 years.

All that said, I don’t share your sentiments that the Euro is doomed. I think the Euro conveys huge economic benefits to Europe, and the pressure to maintain or even expand the interconnectedness is significant. Eliminating the costs of hedging exchange rates and fees for currency conversion, as well as avoiding competitive devaluations, speculative activity, etc., are big benefits. I don’t have to regurgitate the pro-Euro arguments; I think they’re self-evident.

But then again, so are the anti-Euro arguments regarding state-level monetary policy.

In the end, the “who’s next?” witch hunt searching out the “next Greece” strikes me as speculative and half-hearted. The bond markets aren’t pricing in defaults by Portugal, Spain, Italy or other EU states, despite the fever of contagion-talk raging in the press. So I imagine that the Euro will survive, while Greece will revert to (a very cheap) drachma.

At least, that’s the way it looks from here.

Author
  • Luke Handt

    Luke Handt is a seasoned cryptocurrency investor and advisor with over 7 years of experience in the blockchain and digital asset space. His passion for crypto began while studying computer science and economics at Stanford University in the early 2010s.

    Since 2016, Luke has been an active cryptocurrency trader, strategically investing in major coins as well as up-and-coming altcoins. He is knowledgeable about advanced crypto trading strategies, market analysis, and the nuances of blockchain protocols.

    In addition to managing his own crypto portfolio, Luke shares his expertise with others as a crypto writer and analyst for leading finance publications. He enjoys educating retail traders about digital assets and is a sought-after voice at fintech conferences worldwide.

    When he's not glued to price charts or researching promising new projects, Luke enjoys surfing, travel, and fine wine. He currently resides in Newport Beach, California where he continues to follow crypto markets closely and connect with other industry leaders.

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