Greece's 1-2-3 Plan For Default And Amazing Recovery (LINK)
Greece, which has been stuck in a deep debt crisis for the past five years, is due to pay back 300 million euros ($410 million) to the International Monetary Fund next Friday (June 5th).
Only after a default can contracts like pensions or employment agreements be breached. Greece's “excessive government headcount, wasteful programs and overly generous compensation packages are due for major reforms." However, such reforms can only be implemented after Greece defaults on their payments. In other words, the IMF and other foreign creditors have to take the hit first before Greece's government employees, pensioners, and all who benefit from government services can.
Greece’s troubles (central government debt/GDP of 192%) have gotten so far out of control that avoiding a default is unrealistic. “So, embrace it. Eventually, a debt restructuring should reduce this burden to something more manageable. Once the default has begun it should be much easier to restructure other expenditures. For one thing, the Greek government might not be able to borrow any more money. So, they will have to do with the revenue they have. A balanced budget!”
Greece needs a healthy private economy, capable of expanding employment and rising prosperity. "Before any big reductions in government spending, they should have a major tax reform to get the near-dead economy moving again. Steve Forbes has proposed a combination of a . This is a fine strategy, and the result would be a gigantic expansion in economic activity. It is quite possible for Greece’s nominal GDP, in euros, to in the decade following such a tax reform. Tax revenues, which have been falling since 2008, ”
“The private economy would be where all the action is. Typically, after a crisis period, there are gigantic business opportunities everywhere. A middle-class life in the private sector becomes more appealing than life as a government parasite. The steps to take are now clear. First, the default. Second, tax reforms, and other regulatory reforms to make Greece a good – nay, a great – place for business. Third, eliminating all the corruption and rot inherent in the government’s present spending patterns, while preserving important services and welfare programs.”
Do you think this is a good plan for Greece? Can you come up with a better option? How do you think Greek pensioners and other citizens that benefit from these government services will react to this plan? How do you think Greece's creditors will react to this plan? Lastly, if Greece does default do you think they are putting themselves at risk of getting thrown out of the Eurozone?