There. I said it.
Today, it was announced that the French and German governments have agreed, with help from the IMF, to bail out the Greek economy to prevent it from completely coming apart.
This move shows a few interesting things. To wit:
- France and Germany "wear the pants" in the EU. Always have, always will.
- Greece, as a country, was considered "too big to fail." Well, this is not literally true, but systemic risk is certainly an issue here.
- This, for me, calls into question Europe as an optimum currency area (OCA). Now, I know that Europe is the first place this has really been tried, but I think, after the Euro conversion in 2002, something like this was bound to happen sooner or later.
- The recent labor unrest in Greece is a reflection of the dire (to put it mildly) state of the Greek economy rather than its cause.
- I think a lot of the blame for a lot of the current economic problems lie in the 1970's and former Prime Minister Andreas Papandreou and his Pan-Hellenic Socialist Party (PASOK). After the military junta was brought down in 1974, the right was discredited and the left took over in all levels of government. While this is not in and of itself bad, it did mean that there was no effective opposition and the PASOK and its allies proceeded to wreck the economy and create general malaise amongst the populace.
- This might happen again. I am looking at you, Spain and Portugal.
Addendum: Will the US become the next Ireland, which supposedly serves as a model for recovery for the Greeks? Probably not.