In what is becoming almost like a Greek version of “Groundhog day” European Union leaders have approved another round of bailout round for Greece, totaling approximately $100 Billion.
Greek Prime Minister Lucas Papademos won cabinet approval for the deeper austerity cuts required to obtain the latest bailout. He still needs approval from the Greek parliment. European taxpayers don’t want to finance another bailout round for Greece, and many Greek citizens certainly don’t want to accept the relentless austerity cuts required to prevent a formal default.
Both parties are trapped in a classic “devil’s circle” from which there is no escape of another bailout round for Greece. Current and former prime ministers, including former Greek Prime Minister Papandreou, the current leader of the Greek socialist party describes the continued bailouts as “The recipe for the program isn’t right or wrong. It’s the only one available.”
Most Greek leaders, including Antonis Samaras, the leader of New Democracy, Greece’s second largest party stated the newest bailout “distances us from bankruptcy, looting, the chaos that would follow”, referring to a default. He followed with “I’m sure you will all do your duty by your country”.
If the Greek parliment does not approve the bailout plan and defaults on it’s debt, a default would halt the payment of wages and pensions, shut schools and hospitals, and threaten businesses.
Examples in history of what some governments do to avoid the crisis of a default, once at hand, is to print money. This often will be only a short term fix. Printing money in most cases will cause inflation to skyrocket. There are few exceptions. The only exceptions are if the problem is containable to a one time, not too large printing of money. Another is if the country has a strong economy and world markets do not punish the country. A recent example could be the 2009 U.S. Federal Reserve bailout.
Other cases in history are not so kind, including Idi Amin’s regime in Udanda in the 1970’s. Upon being told by his finance minister that the county had a problem and had run out of money, Amin reportedly stated “What is the problem, just print more money” and replaced his finance minister when he protested.
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