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

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

Recruitment Genius: Customer Service Executive

£18000 - £22000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Retail Buyer / Ecommerce Buyer

£30000 - £35000 per annum: Recruitment Genius: Working closely with the market...

Recruitment Genius: Sales Executive - CAD Software Solutions Sales

£20000 - £50000 per annum: Recruitment Genius: A reputable company, famed for ...

Ashdown Group: Client Accountant Team Manager - Reading

Negotiable: Ashdown Group: The Ashdown Group has been engaged by a highly resp...

Day In a Page

Read Next
 

Letter from the Education Editor: This shocking abuse of teachers should be taken seriously

Richard Garner
Brand loyalty: businessmen Stuart Rose (pictured with David Cameron at the Conservative conference in 2010) was among the signatories  

So, the people who always support the Tories... are supporting the Tories? Has the world gone mad?

Mark Steel
War with Isis: Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria's capital

War with Isis

Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria
Scientists develop mechanical spring-loaded leg brace to improve walking

A spring in your step?

Scientists develop mechanical leg brace to help take a load off
Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

Peter Ackroyd on Alfred Hitchcock

Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

Ryan Reynolds branches out in Woman in Gold

For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
Why Robin Williams safeguarded himself against a morbid trend in advertising

Stars safeguard against morbid advertising

As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
The UK horticulture industry is facing a skills crisis - but Great Dixter aims to change all that

UK horticulture industry facing skills crisis

Great Dixter manor house in East Sussex is encouraging people to work in the industry by offering three scholarships a year to students, as well as generous placements
Hack Circus aims to turn the rule-abiding approach of TED talks on its head

Hack Circus: Technology, art and learning

Hack Circus aims to turn the rule-abiding approach of TED talks on its head. Rhodri Marsden meets mistress of ceremonies Leila Johnston
Sevenoaks is split over much-delayed decision on controversial grammar school annexe

Sevenoaks split over grammar school annexe

If Weald of Kent Grammar School is given the go-ahead for an annexe in leafy Sevenoaks, it will be the first selective state school to open in 50 years
10 best compact cameras

A look through the lens: 10 best compact cameras

If your smartphone won’t quite cut it, it’s time to invest in a new portable gadget
Paul Scholes column: Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now

Paul Scholes column

Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now
Why Michael Carrick is still proving an enigma for England

Why Carrick is still proving an enigma for England

Manchester United's talented midfielder has played international football for almost 14 years yet, frustratingly, has won only 32 caps, says Sam Wallace
Tracey Neville: The netball coach who is just as busy as her brothers, Gary and Phil

Tracey Neville is just as busy as her brothers, Gary and Phil

The former player on how she is finding time to coach both Manchester Thunder in the Superleague and England in this year's World Cup
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?