Thursday 18 July 2019

We must face up to reality of debt crisis

THE Greeks have a phrase for it: between Scylla and Charybdis. In the case of modern Greece, the choice is between the piling on of more debt, which hardly anyone believes the country can support, and rejecting the loans and immediately running out of money -- a prospect the governor of the Bank of Greece called "economic suicide".

A shrewd Athens parliamentarian -- which probably means most of them -- might think this not such a difficult choice at all. Everyone now thinks the EU strategy will have to change. It is not just a Greek chorus of economists chanting doom; the governor of the Bank of England, and the leading central banks' own organisation, have both said the present EU/IMF policy is not credible.

If it is going to have to change to something better, it makes sense for Greece to wait. The danger, as yesterday's scenes show, is that Greece may not be able to do so for much longer.

Greek protesters are rioting, not over debt burdens, but over austerity measures designed to slow the rise in the debt. If the current Greek government survives this vote, it may well lose another, when the electorate votes in the autumn.

A new government would face exactly the same dilemma as did Fine Gael and Labour in this country: the alternative to present policies, however inadequate they may be, are just too risky to contemplate.

Yet, unless European leaders can come up with something more plausible in the next few months, a new Greek government might have no choice but to steer for the Charybdis of unilateral default -- with the risk of horrible consequences far beyond Greece.

The protesters are wrong about one thing -- as are many of the Irish contributors to the debate. Austerity -- a good deal of it -- is unavoidable. Irresponsible governments in both Ireland and Greece wrecked their countries' public finances. These must be fixed, irrespective of how we deal with debt, or which currency we use.

While working, waiting and hoping for a coherent response to the debt crisis, the government must explain this reality to the public. Greece cannot avoid a fall in living standards, no matter how many rocks are thrown. Neither can Ireland, no matter how many solutions are slung around.

In the Greek myth, Odysseus chooses to sail close to Scylla, though it means losing some sailors, rather than risk the entire ship in the whirlpool of Charybdis. It is not a bad simile for the choice facing us all.

Irish Independent

Today's news headlines, directly to your inbox every morning.

Don't Miss