Why Greece Doesn't Tell the Germans to Piss Off

| Mon Jan. 16, 2012 2:00 PM EST

Atrios writes:

Mysteries

I still really just have no idea why Greece doesn't tell them all to piss off, and give the opportunity to French and German leaders to explain to their people why they're going to shovel taxpayer money into the maws of the banksters.

Since Atrios has said this so many times, it's worth pointing out that there actually is an answer: Greece is broke. They're spending way more than they're taking in, and if they default on their bonds then no one will loan them more money for a very long time. This would instantly force more austerity on Greece than even the Germans are currently demanding from them.

Now, maybe they could not just default, but also exit the euro at the same time and go through a huge currency devaluation. This would eventually repair their economy. But "eventually" might be quite a ways down the road, and in the meantime Greece would suffer from massive capital flight, inflation would rise, pensions would lose half their value overnight, unemployment would skyrocket, and imports would dry up. These are not prospects that any politician is apt to take lightly.

In the end, it's possible that this is the best route for Greece. It worked for Argentina, after all, though it caused massive pain for several years first. But it's hardly a no-brainer.

The better solution for everyone, of course, would be much more expansionary monetary and fiscal policies in the short term and deeper reforms over the long term. But Greece has no control over that. The only question for Greek leaders is: given the actual monetary and fiscal policies that Germany and France have forced on Europe, what is Greece's best option? There's no easy answer to that.