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Old May 5 2013, 10:32 AM   #9
Location: Where the surf meets the turf.
Re: Greece's Underlying Policy Problem.

T'Girl wrote: View Post
Basically this, is Greece's current financial problems a result of it's monetary policy, or it's fiscal policy?

I feel that the underlying problem, the original source of the problem, is the Greek government's long term unwillingness to enact a reasonable fiscal policy. Especially since it joined the eurozone.

If it had had a realistic fiscal policy over it's recent history, it wouldn't be having problems today selling bond/securities.

Or is the true core of the problem Greece's fiscal policy?

What say you?

A bit of both. Yes, the Greeks found that when they entered the Euro they could borrow at dramatically lower rates and they went over board but they also entered the Euro Zone on to high an exchange between the Drakma and the Euro. This meant Greek products just became too expensive especially since Greek productivity is so much lower than in Northern Europe so this effectively priced most Greek goods off the market.

The other problem is corruption, over regulation, and cheating on taxes is as natural as breathing to Greeks. EVERYONE cheats on their taxesl when an election is coming up the first thing the government does is stop collecting taxes because they might lose votes if they actually made people pay taxes. Lastly, the entire Greek economy is massively over regulated, this is a long lasting effect of the country being a military dictatorship for so long, but even getting a phone line connected to your house requires getting permits from at least three government offices and it can take years to get permission to open a store or to build a development. They need to slash the bureaucracy, eliminate the minimum wage so that it becomes cost effective to hire Greek labor, and lastly they should consider exiting the Euro if wages don't come down to a level where it is cost effective to hire people.
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