Viewpoint: Greek economic crisis

euro coin

Professor of Finance, Costas Milas from the University’s Management School, comments on the Greek economic crisis saying it brings to mind Dante Alighieri’s Inferno (Hell), the first part of Divine Comedy, his 14th century epic poem.

Read the BBC story here:

Professor Milas said: “According to Dante, Inferno consists of nine circles. In the third circle, Cerberus, a mythical hound with three heads, prevents the Gluttons (that is, the greedy eaters) from exiting Hell. Only last year, Greek Deputy Prime Minister Theodore Pagkalos commented that ‘We ate everything together!’ a comment meant to admit that all politicians contributed to the economic downfall of Greece.

“With this in mind, it is natural to interpret Greeks as modern versions of Gluttons, and interpret Troika (that is, economic advisers from the European Commission, the European Central Bank and the International Monetary Fund) as a modern version of Cerberus. Indeed, only last week, the Troika-Cerberus put together a new bail-out package aiming at reducing the debt burden of Greece through a 50% ‘voluntary haircut’ on Greek debt private holders. At the same time, Greek-Gluttons allowed Troika-Cerberus open access to all Greek ministerial offices in an attempt to control government spending and boost tax revenues in a country where black economy represents some 40% of its national income.

“Nevertheless, George Papandreou’s referendum idea on the bail-out deal threw the whole plan into disarray and brought his government down, at the same time causing chaos in international markets and risking a Eurozone meltdown.

“Yet, all is not lost for Greece and Eurozone. Today’s decision by ECB to lower interest rates together with its plan to continue buying European peripheral government bonds will ease, at least temporarily, liquidity pressure in the markets. At the same time, Greek political parties need to move extremely quickly towards forming a national unity government led by a well-respected Greek, like former ECB Vice-President Loukas Papademos, with four straightforward objectives:

1. Drop the referendum idea.

2. Secure the bail-out deal put on the table by Troika only last week.

3. Reassure Europeans that Greece is still very much committed to Eurozone membership.

4. Proceed as soon as possible with all necessary structural reforms (agreed with the Troika but not implemented yet) to give the economy a desperately needed competitive boost.

“Then, and only then, Greeks can hope that their Eurozone dream will stay alive. Otherwise, an uncontrolled default is definitely on the cards possibly followed by more Eurozone defaults through the domino effect.”

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