Why Greece Matters
A Greek collapse would be bad news for a still-fragile banking system, and that affects all of us.
In an unprecedented display of 21st century comity and bipartisanship, I would like to fully endorse Andrew Stuttaford's takedown of Sen. Jim DeMint (R-SC), who remains defiantly unhappy that his proposal last year to ban taxpayer money from being used to "bail out" foreign countries was voted down:
All one can say is that, on this occasion, the Senate got it right. Senator DeMint may not like it, but we live in an economically interdependent world....Greece's problems are not just Greece's, and the threat that they pose to economic recovery stretches far beyond that unfortunate country's borders and, for that matter, the frontiers of the wretched eurozone.
The current weakness in the global economy is a clear and present danger (to borrow a phrase) to the dangerously fragile, dangerously indebted U.S. economy and to this nation's wider strategic, political, and economic interests. For all its flaws, the IMF is the best tool we have to help countries (usually on tough terms — that's why they are rioting in Greece, Senator) that have got themselves in the mess they have, a mess that threatens us, too. Seen in this light, crippling the IMF makes no sense — no sense at all.
Oddly enough, I wrote nearly those exact same words last night for distribution via email tomorrow. It's part of the answer to Felix Salmon's question, "Why should Americans care about Greece?" (For the other part of the answer, sign up for my newsletter! In addition to the rest of the answer, you also get bonus cats.)
What's more, I think Stuttaford is right about this despite the fact that even with IMF help Greece is likely doomed. In fact, as pessimistic as I've been about Greece for a long time, I've grown more pessimistic as time passes. At this point, unless the EU is almost literally willing to make Greece a long-term ward of the state and provide the massive amounts of funding needed to pull this off, it's hard to see any endgame that doesn't include debt default and Greece's exit from the Euro, with all the attendant chaos that implies. The IMF rescue delays the day of reckoning, which might be worthwhile in the same way that delaying GM's collapse until the economy improves might have been worthwhile, but I don't see how it eliminates it. I sure hope I'm wrong, though.