Thursday, June 30, 2011

What if Greece is a Kleptocracy?

link here to article

This article paints a bleak picture of the problems of Greece in particular and of the Eurozone more generally. If we assume that Greece is a kleptocracy, or a failed state, there is no real chance for saving Greece and its creditors. The successful vote by the Greek Parliament to accept the austerity measures, imposed upon the government, will only buy time. The majority of the Greek citizens understand that they are being asked to pay the price for kleptocracy. Many of the well educated plan to leave the country in order to find acceptable employment, and the government will have its hands full trying to restore order among those who remain.

In addition to the political unrest, there is little reason to expect that the economic growth assumptions that have been used to show that Greece will be able to produce the tax revenue needed to pay down its debt, are possible with the cuts in government spending. What will replace the cuts in government spending in an economy with high unemployment? Moreover, if the kleptocrats refuse to pay taxes and the government is unable to force compliance, where will the needed tax revenue come from?

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