This Is About Culture, Not Economics

This Is About Culture, Not Economics

Matt HealeyTuesday,7 July 2015

This past Sunday Greece voted to reject what Angela Merkel described as a “generous” bailout proposal. Apparently the Germans and the Greeks have different views on the proposal. From an economic perspective the Greeks may be on to something. Austerity is not a great approach to solving massive debt problems. If you have minor debt issues, then yes, you can cut your way to solvency. The thing is that Greece does not have minor debt issues, they have massive debt issues and the only way to deal with them is to grow the economy. Austerity will not accomplish this.

Despite this, I am firmly in Germany’s camp on this one. The main reason is that Greece has one of the most corrupt and non-functional economic systems in the European Union. This is a country where the income tax rate is irrelevant because no one ever pays it. Where government corruption is only rivaled by corporate corruption. So, against that backdrop, the troika really had no choice. They had to come down hard on Greece because in the 6 years since the initial crisis happened, there has been little to no reforms to the Greek system. It is hard to ask Germany to continue to bail out Greece when Greece will not even take on their current corruption challenges. Until the Greek culture begins to realize that you have to pay your taxes and that massive amounts of corruption are not acceptable, then the rest of the EU has the right to drop the hammer on them. To date the Greeks have not realized that fact.

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