The global economic conditions in the World regarding Greece is the same as it would be if Greece had already defaulted
Greece as it stands on now has the worst credit rating in the World – The situation would be the same if not a bit better if Greece defaulted. Well it could not be worse.
The Greek government cannot borrow in the open market – the same situation as Greece would be in after a default. Perhaps the situation would be better after a default.
These are the 2 biggest problems that would face Greece if it were to default. And the country is already at that stage. So Greece is experiencing all the negatives of a default without actually receiving any of the benefits that a default would bring.
What benefits would a default bring? Ironically, less government spending. Currently Greece pays around 10% of all taxes to service the government debt. With a default, this would be reduced by at least 50%.
Government contracts would all be up for re negotiation with a default so the pensions burden could also be massively reduced or renegotiated.
A default without EU, IMF intervention after would force the Greek government to reduce it’s spending, this would have to come in the form of huge public sector layoffs from unproductive sectors. For example tax offices, government departments concerned with enforcing oppressive regulations.
The elephant in the room however is pensions. Greece has a massive pension obligations, like most European countries. The default would be a huge help to the government in renegotiating their obligations. If this is opportunity is treated with fairness and not an attack on the little guy then it could be possible for the obligations to be reduced without sending people into poverty.
If Greece could implement a set maximum pension for every person in the country, ie everbody who qualifies for full pension gets the same amount per month regardless of their earnings it is possible the obligations would be much more managable. For example in Germany the maximum state pension is 2100Euro per month, in Greece it is 2961Euro per month, if this maximum figure were reduced to 600euro a month the savings I presume would be huge.
Okay, there are going to be thousands of people who have paid pensions for their lifetime with the expectation of X pension when they retire. Unfortunately these people are going to be stung. There is no way to avoid it. If they can take the pain with the knowledge that they are helping the country in the future maybe it is possible for them to live with it.
Of course the government doesn’t have the money to pay these pensions, even though they have taken the money from the pensioners during their working lives (the same situation in all European countries and the USA) so the youth will have to pay for these people’s pensions. But the youth would benefit if the state allowed them to opt out of the state pension system and go with a private company. With this, Greece would have a clear path to sustainable future and its people a future with a decent pension without the risk of government mismanagement.
I have digressed a bit from the original point of the article but in summary Greece is already experiencing the same environment as it would if it had already defaulted but without any of the benefits such as lower interest payments and a legal environment where the states obligations can be renegotiated into something that is realistic and sustainable rather than living in an environment where politicians are struggling with the impossibility of trying to live up to impossible promises which were made with the sole of interests of increasing their power
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