Once again, Greece has been bailed out, and taken on more debt provided by the other European countries and in return have promised to implement reforms. The Greek politicians hate the deal, but have agreed to implement it. At least try and implement it, their track record for implementations is not that good. And the other European countries, notably Germany, Netherlands, Finland and Latvia have expressed their distrust of the Greek politicians and have questioned why they should bail out Greece once more. They are also deeply against any write off of debt and very much for more austerity measures. But the essential question one would have to answer is – does this deal provide for a better, more secure and stable Europe, or are there more significant changes needed?
I think that all we have done is to kick the can down the road once more, because the systematic flaws of the European Monetary Union has not been addressed. Sure there is a lot more that Greece can do to make their economy competitive. They could relax their labor laws, get rid of cartels, make sure that everyone pay their fair share in Taxes and reduce the size of their overcrowded, corrupt and inefficient public sector and government. They could raise the age of retirement even more and try and get rid of many Tax loopholes by implementing a flat Tax rate system. And they should get rid of the attitude that they are the victims, because nobody forced them into this mess but their democratically elected government. But the other European countries should also realize that they benefited from a larger Union, partially because the exchange rate is once within the union (obviously) but also because the exchange rate reflects the competitiveness of all economies put together.
Just imagine what would happen if the Germans decide to exit the Union and adopt their Deutsch Mark (DM) again? The DM would soar (at least vs the Euro), slowing the export driven economy substantially. This would hurt the German economy. So the Germans have benefitted by not having the DM, while the Greeks have had to realize that they have to restructure their economy to be able to compete with the European peers. You generally find a very similar situation within countries. In Germany for example, most of the car manufacturing is in the south, thus they have a bigger Tax base than counties like Bremen. In the USA, you have states like Alabama, where the GDP per capita is much lower than that of New York. But because many of the taxes are collected on a Federal system, the governments of the US and Germany can implement transfer pricing, where some “underachievers” are being supported by “overachievers”. Thus some counties or states get more Tax income per GDP allocated than others, thereby helping them achieve their goals.
The Euro Monetary Area doesn’t have this, because each country wants to preserve their federal independence. But that is like wanting the best of both worlds. This is clearly not achievable, and even though everybody is better off if they stay together, nobody wants to share their part of their success.