I did a radio show recently on the Greek debt crisis with Monsignor Kevin Sullivan, Executive Director of Catholic Charities of the Archdiocese of New York. The radio show is JustLove, broadcast on Sirius XM on July 25, 2015.
I’m the third guest (minute 38:00), after David R. Cameron, Professor of Political Science and Director of EU Studies at Yale University and one other. The main points made are that:
a) Virtually everyone, including the IMF and even Angela Merkel, agree that the current bailout will not be sustainable. And this means some form of debt relief on the horizon. Germany, after all, received debt forgiveness in 1952 that cut its foreign debt in half. In today’s dollars, after adjusting for inflation, that amounts to about $32 billion. And the Europe of 1952 was much poorer and had many fewer people. So on a real per capita, GDP-size adjusted basis, the bailout of Germany was pretty big in today’s money. Greece will likely need something similar.
b) Second, as noted here, the Greeks work many longer hours than other Europeans, so their labor productivity problems arise from structural and institutional reasons, having to do with regulations, monopolies, and corruption, not from inherent laziness.
c) Finally, the U.S., for all its overhanging debt, does not face Greece’s refinancing problem. We have our own currency and it floats, rather than being pegged to gold. We have Milton Friedman to thank for the nudge toward a saner monetary policy in terms of a market-driven exchange rate, and it never ceases to amaze me how otherwise reasonable, well-educated people claim to want to tie our hands by bringing back the gold standard. That same kind of wanderlust led the Greeks to link their fates to the Euro, and the outcome has not been pretty.
To listen, click here: “The Greek Debt Crisis” (minute 38).
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