> Greece has no real alternative but to adopt severe reforms and that means severe "austerity", whereby "austerity" of course what people mean is shrinking the Greek state to a size more appropriate to the size of its economy.
Greece has a perfectly workable alternative in a Grexit. It would help them enormously and not require austerity but there are political reasons that won't allow it.
If Greece was using the drachma, this would not be a problem.
The other problem with austerity measures is that they have a tendency to inhibit growth or even shrink the economy; shrinking the government further certainly doesn't help that situation.
EDIT: I forgot to add that Greece has a primary budget surplus - meaning that if it wasn't for the debt they owe, they'd be doing fantastically budgetarily.
As a purely economic solution, a Grexit combined with a default might work. However, who would step up and finance the ongoing deficit? Interest rates even for short term borrowing would be unsustainable. What would happen in the meantime, until such a Grexit could actually be performed? The banks don't have money any more, there's no infrastructure to print new bills, there's no plan on how to actually do that. It's the choice between austerity because the lenders want it or austerity because there's no money left.
On top of that, would Greece leave the EU? There's a lot of greek living and working abroad under the EU residence/work rules. Would such a vote not be perceived as a "No" to europe, effectively pushing greece out of the EU at least on a temporary basis?
I'm not convinced that the Grexit is a workable alternative in a larger context.
> As a purely economic solution, a Grexit combined with a default might work. However, who would step up and finance the ongoing deficit?
As I added in my edit, Greece has a primary budget surplus. There would be no ongoing deficit.
Existing debt would be paid off with the expedient of default and currency devaluation, just as other countries have historically done. A little rough patch and then things look up. Seems a much healthier alternative than decades of economic suffering due to more and more austerity and the consequences thereof.
> there's no infrastructure to print new bills
I can't imagine that is a very hard problem to solve.
> On top of that, would Greece leave the EU? There's a lot of greek living and working abroad under the EU residence/work rules. Would such a vote not be perceived as a "No" to europe, effectively pushing greece out of the EU at least on a temporary basis?
Does leaving the Euro mean leaving the Eurozone? That's an honest question. I don't think it does, but I've heard this said before.
On your final point, I don't disagree: at least right now leaving the Eurozone is politically untenable. But I suspect that economically it might be the most sensible thing to do, and not just for Greece. Unless Europe forms a real fiscal union, this kind of madness will happen over and over.
> Existing debt would be paid off with the expedient of default and currency devaluation, just as other countries have historically done.
All current debts are held in EUR or other foreign currencies. Currency devaluation won't help with the existing debt. I doubt a single creditor would accept exchanging EUR denominated debts to New Drachme.
> I can't imagine that is a very hard problem to solve.
Even the greek finance minister considers that a major roadblock.
> As I added in my edit, Greece has a primary budget surplus. There would be no ongoing deficit.
Greece had a primary surplus, it's tethering on the edge of not having a surplus any more. Greece desperately needs money to invest and kick-start its economy. And then there's still the IMF debt and the IMF always wants and gets its money. Even Argentina treated the IMF debts preferential. Who would step up and cover that?
At this point the European contracts are such that a country can only leave the Euro if it leaves the EU.
However, I think it would be possible for the EU to agree to amend the contracts to allow Greece to leave the Euro while staying inside the EU, if Greece so wishes.
> How will a country that has no money and terrible credit do when it needs to import 50% of its food?
Greece, and Greeks, do have money. I am not sure what you mean. It's not as if Greece is the only poor country which imports most of its food.
Food prices have already been skyrocketing. As the article points out, austerity has tanked the Greek economy despite repeated predictions by European 'experts' that any minute now, austerity would cause Greece to turn a corner. Why do you think food prices would get substantially worse?
> has a perfectly workable alternative in a Grexit
Its not "perfectly workable" in a country that imports >>50% food, has practically zero foreign currency reserves, and is already considered a bad lender.
Greece has a perfectly workable alternative in a Grexit. It would help them enormously and not require austerity but there are political reasons that won't allow it.
If Greece was using the drachma, this would not be a problem.
The other problem with austerity measures is that they have a tendency to inhibit growth or even shrink the economy; shrinking the government further certainly doesn't help that situation.
EDIT: I forgot to add that Greece has a primary budget surplus - meaning that if it wasn't for the debt they owe, they'd be doing fantastically budgetarily.