My previous two posts on Greece reminded me of something I meant to comment upon the other day. On Friday’s Morning Edition there was a story on the Greek crisis that had the following observation that struck me:
Resolving this crisis has taken years, and there’s a reason: a debt crisis has never really been solved this way before. Here’s Zoe Chace of NPR’s Planet Money team.
[…]
CHACE: Usually, it’s like this: the countries default on their loans – then we talk.
It struck me upon hearing this that yes, that’s true. The immediate example to me was Mexico in the early 1980s (and then several other Latin American cases that followed suit): the countries in question basically came out and said one day: we are suspending loan repayments because we cannot afford to keep paying. This led to economic crisis (locally and regionally). Then came the scramble to fix the problem which eventually led to structural adjustment of economies under the auspices of international lending institutions.
The Greek case is different: instead of going off the cliff and then sending in the rescue crews, the goal here is to find a way to stop form going over the cliff.
Of course, this approach is driven by the fact that Greece is not only in the EU, but part of the Eurozone. Its partners have every reason to avoid being dragged off the cliff too.
