Stiglitzowi echoed by one of the main commentators newspaper “Financial Times” Gideon Rachman, the text under the telling title: “If Europe is not able to bend, can fall apart.”
European politicians who nonchalantly assume that the possible exit of Athens from the euro zone (the so-called. Grexit) will not be detrimental to the economy because the cost of such solutions “have been posted” deeply wrong – he writes on Tuesday Stiglitz, winner of the Nobel economic prize , in the newspaper “Social Europe”.
Firstly, according to Nobel Prize winner creditors should admit to numerous errors involving applying Greece for several years of treatment not only ineffective, but harmful in certain aspects that led to the fact that The country’s economy contracted by 25 percent.
Secondly, the position of lenders Athens is almost as arrogant as to think of American economists before the collapse of Lehman Brothers and the financial collapse in 2008 – writes Stiglitz. And this happens because there is no way to predict the economic impact of Grexitu, and especially its impact on the European financial institutions – argues, warning also that this could lead to recurrence of the crisis on a large scale.
The most important and the consequences would be such that “it is not in the interest of Europe – or the world – that on its periphery were alienated from their neighbors the state, especially now that geopolitical destabilization became obvious,” – emphasizes the Nobel Prize winner.
“The Middle East is plunged into chaos; the West is trying to restrain Russia, which once again became aggressive (…). This is not the time to break up the unity of Europe” – calls Stiglitz.
Rachman points out in Tuesday’s issue of the “Financial Times” that as Prime Minister of Greece puts financial pressure on the EU, as British Prime Minister David Cameron multiplies political pressure, calling for treaty changes.
Both they get much resistance, especially in Berlin, but does not change the fear that the output of one and the other country of the EU is a source of serious concern. “The inability of the EU to behave in a flexible way to the need for change is dangerous. Europe, which itself does not bend, has a much better chance to fall apart” – warns Rachman.
The subject, however, that if the German financial circles quite believe that the expulsion of Greece from the monetary union is a good thing, at least, “Chancellor Angela Merkel, for geopolitical reasons, seems to be willing to keep Athens in the euro area”.
Greek Prime Minister published on Tuesday in an interview with the newspaper “Corriere della Sera” expressed confidence that if the creditors did not give to certain conditions of Athens, “it would be the beginning of the end of the euro area”. According to many economists it is something in it.
In addition, these essential conditions of Greece, include the waiver of further reforms of the pension system. “New York Times” notes that due to the crisis in the early retired there were very many Greeks. This is often the case that their meager pensions have been reduced by 35 percent. “A recent analysis of government (Greece) showed that nearly 45 per cent. Of pensioners live below the poverty line,” and many of them, “especially women, who have lower wages, there is a risk that their income will shrink to end their lives” – he writes “NYT”.
For Stiglitz such a situation, as well as the dramatic contraction of the GDP of Greece, this unacceptable economic and social consequences of drastic austerity that Athens has imposed the so-called. Troika, ie the European Central Bank, European Commission and International Monetary Fund.
“Troika fatally misunderstood the macroeconomic consequences of the program, which imposed (…). And to continue with it in the present circumstances borders on madness” – writes Stiglitz. He explained that the country from which capital flees and talented people, where wages are falling, and export is unable to repay debts if treatment is continued, involving the zduszaniu economy.
Greece is dependent on foreign financial aid since 2010, when it stood on the brink of bankruptcy. Since then, drastic cuts in budgetary spending, the recession and high taxes led to a drop in income Greeks about one-third. Unemployment reached 26 percent.
According to Stiglitz Greece it is willing to meet the vast majority of conditions, which imposes its creditors before they activate another tranche of financial aid. The rest of the requirements is unrealistic and the Greek government “is right, not wanting to sign up to a full program errors” of reforms demanded by especially Berlin “- says Nobel Prize winner.
And he concludes:” This is a program that has proven to be a failure ; few economists believed that ever could be, or should have been implemented. “
A similar opinion was delivered recently by another famous economist Thomas Piketty, who wrote that the method of reducing public debt, which
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