Silber: Greece picked the lesser of two evils

BY KELIN SILBER | JULY 09, 2015 5:00 AM

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On July 5, 61 percent of the people in Greece voted “No” to increased austerity measures by debt collectors. This decision will, hopefully, encourage the debt collectors to reconsider their terms. The austerity deal would do nothing to help the Greek economy and only exists to further punish the Greeks.

The “No” vote demonstrates that the people of Greece want their government to reject the bailout terms and continue negotiators for better ones. The Greeks have responded, and it is now the creditors’ turn to make a move. It is likely that this will force Greece to actually start acting like a self-dependent nation.

Unfortunately, by saying no, there is a chance that Greece will be forced to leave the European Union. The creditors know that letting Greece leave the EU could be catastrophic. However, since Greece is such a small part of the 19 nations in the EU, Europe can enact preventative measures to make sure Greece’s leaving isn’t detrimental to the world’s economy.

The best option is to curb the terms so that the creditors can get their money back without repeating history. That will likely not happen. In late July, Greece will have to pay the European Central Bank 3.5 billion euros, and if Greece cannot agree to a bailout program by then, the Central Bank, housed in Germany, will likely have to stop supporting Greek banks.

Leaving the EU would hurt Greece right away. However, it forces the government to take control of the economy. Greece would have to invest in paying a large sum immediately rather than paying more later, putting the problems on the next generation. The younger generation may have no desire to pay for the mistakes of the old, and they do not wish to repeat history with further austerity deals.

Austerity is poison to the economy because it prevents stimulus, which will continue to grow debt. Many factors caused the debt to reach unstable measures, but the most important are the uncompetitive prices of the Greek economy, which drives workers elsewhere, the ever fluctuating revenue base as a result of Greece’s trouble collecting taxes, and the high amount of government, specifically in pensions, spending.

However, while Greece is a member of the EU, it cannot print its own money. If it leaves the EU, it can lower the price of its goods and services, making purchasing from the country more favorable. With the economy so dismantled, workers are fleeing the country in droves. This new currency would likely drive out the euro, which will likely not be accepted outside of the country, but it could make Greece more appealing for its scientists and workers in the long run.

The “No” vote was for the Greeks to take control of their future and stop their reliance on others in order to bring a return to “Greek pride.” If no agreement is reached in the near future, it will be solely on the government to find ways to encourage its people to spend money, rather than to borrow from Germany.

If they had agreed to the austerity measures, the economy would remain subdued, and it would not have allowed for the influx of cash the country needs to survive.

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