Argument: Bailout does not address policy problems in Greece; delays inevitable
"Euro zone aid for Greece is only short-term solution." Reuters. May 2010: “The immediate danger is averted but very little has been done to address longer-term problems. This is not a blueprint for additional crises. It might work for another small country like Portugal but not a big country like Italy or Spain.”
Bill Bonner. "Greek bailout only adds to debt." The Christian Science Monitor. May 10th, 2010: "Let us make believe that this were possible. Say, Greece is able to borrow in the future at just 8% interest. At 150% of GDP, this puts the annual cost of interest (assuming all the debt were at 8%) at about 12% of GDP. In other words, 1 out of every 8 euros of output would have to be put to the task of paying the carrying cost of accumulated debt. Greece only collects about 5% of GDP in income tax revenues – not even half of what is needed to pay the interest. It’s supposed to collect another 4% in taxes. Already, as much as 30% of the Greek economy has gone ‘black’ to escape taxation; imagine how crowded it gets underground when taxpayers realize that every penny they pay in income tax is used to protect foreign bankers from their foolish speculations. And imagine what happens when, instead of adding 10% to GDP by borrowing, the Greeks subtract 10% to pay back the debt."
"Greece's debt crisis could spread across Europe", The Washington Post, May 2010 "The odds of a full-blown sovereign debt crisis have risen significantly over the past two weeks and especially after the market turmoil Thursday, such that Europe in 2010 looks increasingly like East Asia in 1997 and 1998, when a currency devaluation in Thailand sparked a broad crisis in South Korea, Indonesia and elsewhere.
Jeff Miron. "Let Greece Default". Forbes. May 2010: "A bailout will not address the fundamental causes of Greece's fiscal problems. Greece has an expansive but highly inefficient civil service and an economy stifled by regulation, favoritism and rent-seeking. These policies have generated double-digit deficits and a debt-to-GDP ratio well over 100%. A bailout [...] does nothing to fix the misguided policies that have generated Greece's existing debt and ongoing deficits. Bailout therefore merely postpones the day of reckoning."