Argument: Greece bailout is moral hazard; encourages fiscal irresponsibility

Issue Report: Greece bailout


Sundeep Matharu. “Europe’s $1 trillion Bailout Might not be Able to Save the Euro from Going Down.” TopNews. May 2010: “The more the IMF bails out countries, the more we can expect countries to slip into crises in the future because it encourages risky behavior on the part of governments and investors who fully expect that if anything goes wrong, the IMF will come to their rescue. The bailout of Mexico, for example, was a signal to the world that if anything went wrong in emerging economies, the IMF would come to investors’ rescue.”

“Bailing out Greece is not the answer”. Allister Heath. February 2010 “A rescue would fill the City with joy in the short-term – but would cause huge damage over time. There should be no bailout: it is high time that countries and investors learn to live with their mistakes. Everybody should have seen this coming: even mainstream textbooks on European integration and monetary economics have always acknowledged that a sharp recession would inevitably trigger an almighty fiscal crisis that could tear the Eurozone apart.”

John Lott. “Guess What, America, You’re Bailing Out Banks All Over the World!”. FOX News. May 2010: “Indeed, the bailout not only rewards Greece for its profligate spending it also encourages other countries to overspend. Countries see that American taxpayers will ride to the rescue and subsidize their overspending. The problems just get pushed down the road. If our loans are not repaid, they will simply be rolled over.”

Jeff Miron. “Let Greece Default”. Forbes. May 2010: “bailout both rewards Greece’s bad past behavior and encourages such behavior in future. Greece will never change its misguided policies if the E.U. and IMF infuse it with new cash, just as no teenager who has overspent an allowance will reform if the parents merely expand that allowance.”

“Debt Default Deferral of Greece A Dangerous Precedent, By Lorimer Wilson, May 2010 “While the temporary hiatus given to Greece should be characterized as default deferral, it also, unfortunately, sets a highly dangerous precedent. Each of the next Euro default candidates – Portugal, Spain and Italy – comprise of much larger economies which will therefore require substantially greater levels of assistance. Of course, fairness will demand that they too receive an equivalent boost from their Euro partners and backstopping by the IMF.”