Effie Kesidou: Greece should cut its losses and exit now

We can default now - or wait until the economy is completely shattered

Share
Related Topics

Why are neoliberal economic remedies that have failed spectacularly in other parts of the world being rebranded and applied to Greece? Despite uproar on the streets, the Greek parliament has now voted to accept the package being pushed by Europe and the IMF to address Greece's crisis. This postulates that austerity – cutting public expenditure, reducing salaries and increasing taxes – will stabilise the economy in the long run.

But this solution is already not working in Greece. And the evidence suggests it has been disastrous when imposed across Latin America, East Asia and Africa, provoking opposite results to those that are desired. Thus it will actually deepen the Greek crisis.

The answer to why this medicine is still being foisted on Athens is that the inability of Greece to serve its external creditors would probably lead to the global financial system crashing. Greece's creditors are the largest banks in Europe and the US – banks that would be ruined if Greece could not repay them. The "troika" (European Commission, ECB and IMF) which is "advising" Greece is principally concerned with protecting the interests of these large banks and bondholders.

But it is wholly unreasonable to use the Greek people as scapegoats for a colossal global catastrophe. What the troika is doing is bulldozing Greece's democracy. A puppet Greek prime minister is now making decisions that will affect the Greek people for generations. Workers' rights and democratic institutions that were achieved through the sacrifices of our fathers and grandfathers are being sold at the table of fat and rich negotiators.

Greece will have to default sooner or later, and the best course of action would be to default now. Not defaulting now will unequivocally mean defaulting down the road, by which time the economy will be completely shattered, Greek society dismantled and public property sold off to foreign multinationals. True, if Greece goes through a default, the government will not be able to pay salaries and pensions for approximately two months. But if Greece exits now, it can at least manage its own path to recovery. A default managed by Greece will relieve pressure on the economy by cancelling a large part of the debt, while the depreciation of the new currency would boost export competitiveness.

Take it from an economist: economics is a social science that more often than not strikes out when forecasting the future. But careful reading of economic history teaches a key lesson: neoliberal policies create cycles of boom and bust, and never serve the interests of the wider society.

Dr Effie Kesidou is a lecturer in industrial economics at the University of Nottingham's Business School.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Front End Web Developer

£20000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Back End Web Developer

£30000 - £45000 per annum: Recruitment Genius: This is an exciting opportunity...

The Jenrick Group: Electrical Maintenance Engineer

£36500 per annum + pension + holidays: The Jenrick Group: Electrical Maintenan...

The Jenrick Group: Multi Skilled Maintenance Engineer

£30000 - £40000 per annum + pension + holidays: The Jenrick Group: Multi Skill...

Day In a Page

Read Next
Elton John and David Furnish finalise their marriage paperwork  

Don't be blinded by the confetti — the fight for marriage equality in the UK isn't over yet

Siobhan Fenton
Freeman, centre, with Lord Gladwyn, left, and Harold Wilson on the programme The Great Divide in 1963  

John Freeman was a man of note who chose to erase himself from history

Terence Blacker
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'