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Thursday 21 September 2023 Dublin: 13°C
Associated Press
The Greek problem will never be solved within the eurozone. It’s time to let them leave the euro, default on their loans, and try to rebuild from there with the drachma.

GREECE, LIKE IRELAND, has been unfairly screwed by the fallout from the great recession. And, like Ireland, Greece sowed the seeds of their demise themselves.

In Ireland it was massive inflation in government spending over a short period of time combined with a house price bubble we failed to effectively slow and a lack of robust policing of our banking system. In Greece it was a massive inflation in government spending combined with systemic and widespread tax evasion at all levels in the economy and a level of corruption that goes beyond anything we’re familiar with.

As we enter what could either be the final act of the tragedy of the euro or yet another interminable intermission, where the European authorities buy us all a drink at great expense to delay the inevitable, the blame game continues as it has since 2008. Bailouts saved German banks, we’re told, so naturally the Germans should sort the problem out. The ECB is a malignant organisation of unelected technocrats, only interested in saving money. Etc. Etc. Ad finitum.

We have hope – but’s Greece’s future is deeply uncertain

The blame can be well spread, but must begin within the nations that decided their own fiscal and regulatory fates well before the crisis hit. In any event, the time is well past when blame will make any jot of difference to what must come next.

Ireland has exited its bailout programme and is flying along economically, so we can see a future approaching where the deep-seated problems of the recession may be undone. We have hope. Greece has, quite famously this week, failed to come through its bailout successfully. Their future is deeply uncertain.

The difference between the two countries is stark. The reason Ireland has come through is because two successive governments followed the script provided by the Troika, and the Irish people largely bought into and went along with the plan. The two governments were assisted in this by pliant social partners who understood the score: do this, or you’ll be queuing up trying to get your life savings out of ATMs in €60 increments before we switch to the Punt Nua.

Greece is a barely-functioning state

The Irish people have grumbled and we have seen substantial protests around water taxes in particular, but at no point did it seem like the country was falling apart at the seams; violence at protests began shocking us at thrown water balloons. Furthermore, the non-compliance rate in the Irish tax system is today and has been historically quite high. The property tax has a 96% compliance rate, for all our grumbling about it at the time, and we see similarly high compliance across other taxes; with a functioning tax collection agency that is world class in its abilities at detecting fraud.

Greece, by contrast, is a barely-functioning state. Social unrest has been the default, though riots were somewhat tempered after a bank branch was burned down with employees, one pregnant, left inside to die. Tax compliance has never been high on the agenda, even though the Greek people have leaned towards parties that promise increased government spending at each election.

The whole Greek political system is geared towards patronage in a way that puts our parish pump to shame, with entire cadres of public workers hired around election times to buy votes in a very direct manner. Greek society has not bought into the idea that budgets must be balanced, and anyone who has visited the country can tell you about the amount of card machines simply not working in various businesses. Cash only, please.

We’ve all heard the funny stories about hospitals with gardeners on the payroll despite having no gardens, or tax authorities using Google Earth to count swimming pools in Athens after very few property tax returns indicating they had one. The stories are amusing, but also paint a picture of a country very, very different to our own in their attitudes towards running a functioning society and state.

The only way European partners could get Greece back on track would be to take over and run the country

The Greek problem will never – and let me repeat, emphatically as I can, never – be solved within the eurozone. The only way the euro partners could get Greece back on track would be to directly take over and run the bankrupt country, in the way that state governments in the US sometimes take over the administration of bankrupt cities. Europe is not the US, however, and the mechanisms are not in place; let alone the legitimacy of a unified nation with ever more perfect union considered a driving goal.

We live in a democracy, and it is the right of the Greek people to elect whatever government they wish to do whatever they like. Many seem to conflate the democratic mandate at home with a democratic mandate to force foreigners – for that is what we are to one another in Europe – to pay whatever bill you care to lay at their feet.

The euro was a political construct driven by ideologues who wanted an ever-closer Europe. They did not factor in robust crisis mechanisms and seem to have gone on faith that over time the euro would drive us all into a federal state with the mechanisms that allows a country like the US to function. Without these mechanisms, the euro began to fall apart little over a half decade after the currency reached the hands of ordinary citizens. The crisis in Greece has been ongoing now longer than the euro had been in physical existence when it started.

It’s time to admit defeat

Had we, or Greece, not been in the euro then it is possible that the crisis would have been less severe, thanks to more appropriate interest rates before the crash; and it certainly would have been easier to get through with our own floating currencies to devalue. Ireland, like Greece, has had to go through internal devaluation, driving down wages in particular, while the ECB vacillated over devaluing the currency to make us more competitive on the world stage.

It’s time to let the Greeks go. Let them leave the euro, default on their loans, and try to rebuild from there with the drachma. It is a lovely country with great potential, particularly if it becomes the cheapest place to visit on the Mediterranean thanks to a devalued currency. The Greeks could screw it up royally by continuing to fail to collect taxes or make hard spending choices, but let that be their problem rather than the problem of all Europeans. Wipe the slate and let them take mastery of their own destiny.

With Greece gone, it will be clear that the euro can be taken apart. It would be to all our benefits that this happen over the long run. If you think about it rationally, like a reader of history 100 years hence, it will be clear that a currency that ran into these kinds of problems is analogous to an Austro-Hungarian Empire or the like. An amalgamation that was simply never going to work, brought together by factors other than good natural sense.

The EU will not collapse without the euro

Europe worked when we had our own currencies and could float them next to one another. The Deutsch Mark provided the reference point most of us rotated around, rather than the German-driven euro most of us are attached to at uncomfortable distance. We don’t need currency union at any price; Eurofederalists do.

It’s time we set their project back a bit in favour of our own economic self interest. The EU will not collapse without the euro. But our economies are in danger of collapsing again and again if we try and keep up the political pretence that the euro works.

Aaron McKenna is a businessman on columnist for You can follow him on Twitter here.

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