Comment & Debate
Patrick Barron. “Greece Needs Capitalism And Freedom.” The Bulletin. May 2010: “Let’s look at the so-called threat to the Euro, which is equated as a threat to the E.U. itself. Greece uses the Euro as its legal monetary unit. When Greece joined the EuroZone (not all E.U. members are members of the EuroZone, meaning they have not yet exchanged their national currencies for Euros), the Greek drachma was exchanged for Euros. Now, all transactions in Greece are denominated in Euros. Greek citizens buy and sell using Euros. The Greek government spends Euros and, when it runs a budget deficit, it borrows Euros from private banks…the ECB being restricted by treaty from buying sovereign debt. The Greek crisis is simply that the Greek government is spending more Euros than it receives in tax payments, and private banks are balking at lending it more. Since the Greeks no longer have a national currency, they cannot debase it and pay off their creditors with cheapened drachmas. So, the Greek government is left with the choice of raising taxes, cutting spending, or some combination of the two that will satisfy its creditors. Now, would someone please tell me why and in what form this Greek financial crisis, serious as it is to the Greeks themselves, constitutes a threat to the Euro?”