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By Ilya Rzhevskiy
July 14, 2011

MUNICH—The Greek financial crisis is not getting any better, as more protests spur through the streets of Athens with social instability rising.

The continuously incoming rescue packages from the European Union and the International Monetary Fund (IMF) help Greece stay solvent, albeit barely. But the question is, do they really help?

Many European experts are openly discussing the possibility of Greece temporary exiting the eurozone, the euro currency block, and introducing its own currency to sustain the country from complete default.

Hans-Werner Sinn, the renowned German economist who is also the president of the Ifo Institute for Economic Research, is of the opinion that Greek goods and services should be revised 20 to 30 percent cheaper in all aspects in order to become more competitive in the market and regain stability.

He thinks that the best way to do that is not to lower prices for all goods and housing by 30 percent, which would be a complex maneuver, but to fix the temporary Greek currency rate versus the euro down by 30 percent and all the prices will automatically be regulated.

In this way, all the internal prices, salaries, and loans still remain the same value inside the country, only that they will be in a different currency. As for the external loans, they would become 30 percent more expensive—which is an unavoidable situation, according to Hans-Werner.

A second approach, not favored by Hans-Werner, is to keep the euro currency, but lower all the prices and salaries inside the country. Such an approach was once used widely by Germany in 1929 during the reign of Chancellor Heinrich Brüning, when prices and salaries fell by 30 percent, which pushed the Weimar Republic (old name for Germany) to the brink of a civil war.

Hans-Werner believes that once Greece stabilizes its economy, it can again enter the euro currency block, thereby bringing fewer losses to itself and all the other eurozone members.

Not all economic experts share Hans-Werner’s opinion. Many hold that it’s too dangerous for Greece to exit the eurozone, as it would not be able to sustain its own economy by itself.

Overall, Greece is set to receive another tranche of a rescue package of 110 billion euros (US$154 billion)—the biggest in the history of the eurozone—followed by an 85 billion euro loan to Ireland and 78 billion euro loan to Portugal. Greece’s economy bears the heavy burden of 216 billion euro in debt, which is about 120 percent of its GDP in 2010. The Greek financial crisis was mostly caused by the incorrect financing of the country—mainly taking outrageous loans without the possibly of paying them back. Estimated tax evasion also costs the Greek government about 20 billion losses per year.

The Greek government is trying hard to implement austerity programs to lower the current gaping budget deficit. The austerity programs mostly target slashing public sector jobs and salaries.

As tragic as the Greek tragedy sounds, it is not at all that bad. Many people don’t know much about the public benefit system in Greece that is about to be slashed. For example, unmarried or divorced daughters collect the pensions of their deceased parents. Many civil workers retire with a good pension upon reaching their 40s.

Greece is known for its abundance of special bonuses for behaviors, which in other countries people take as normal work conduct. For example, according to the Toronto Star, Greeks get a bonus for showing up to work on time, for speaking a foreign language, for working outdoors, for using a computer and many others. And, without exception, Greek public and private sector workers get 14 months worth of salary in one year.

Aside from this, Greece employs many committees and organizations that get paid, but do not really do any work, or at least nobody seems to know what they are doing. One example is a committee overseeing the management of Lake Kopias, which unfortunately dried out in 1930.

Besides working, Greeks like to party. Greece is voted by many club and party sites as the best party place on the planet. Mykonos Beach is rated the No. 1 Party Beach in the world by many beach party top listings such as It is not at all uncommon for many Greeks to spend 30 vacation days a year partying at Mykonos and thereby living the meaning of Greek word “hedonism.”

Known as the spoiled kid of the eurozone, Greece is battling hard to keep these benefits by staging violent protests and not cooperating with the government’s efforts to reduce the budget deficit. It remains to be seen whether Greece will assume responsibility and curb the lavish expenses and corrupt practices in order to strengthen the eurozone with decent work ethic and stability.

Source: The Epoch Times.


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