The other day in class, part of our discussion on Greece involved discussing whether or not Greek politicians were indifferent to their debt issues. This Bloomberg article asserts that Greece will likely leave the Euro in part because its politicians simply do not care about their overwhelming debt. The evidence for this comes from a lecture given by Yanis Varoufakis in 2013 where he recommends Greece defaulting like Argentina did:
“My proposal was that Greece should simply announce that it is defaulting, just like Argentina did, within the euro in January 2010, and stick the finger to Germany and say `well, you can now solve this problem by yourself’.
What is more insightful is his attitude toward the consequences of Greece defaulting:
“The most effective radical policy would be for a Greek government to rise up or a Greek prime minister or minister of finance, to rise up in EcoFin in the euro group, wherever, and say “folks, we’re defaulting. We shall not be repaying next May the 6 billion that supposedly we owe the European Central Bank. My God you know, to have a destroyed economy that is borrowing from the ESM to pay to the European Central Bank is not just idiotic, but it’s the epitome of misanthropy. Say no to that. Put them in front of their contradictions. Make them face the contradictions of the euro zone themselves. Because the moment that the Greek prime minister declares default within the euro zone, all hell will break loose and either they will have to introduce shock absorbers, or the euro will die anyway, and then we can go to the drachma.”
However, it is not fair to place all the blame on Greece and the author does mention that leaders in the Euro area should put less pressure on Greece to pull itself together. The article suggests that this is unlikely when talking about German Finance Minister Wolfgang Schaeuble and his thoughts on Greek debt.
Ultimately, the Euro may be unsustainable because politicians in both parties simply refuse to work out a deal.