Greece joined the EZ in 2001. Greece’s former national currency,  the drachma, was retired from circulation about a year later. At that time about  75% of Greece’s public debt was in Euros. Well respected economists argued  against including Greece into the EZ. Greece had suffered years of high inflation and carried an excessive public debt. Institutional investors warned that the  inclusion of Greece into the EZ might send the wrong message to other countries seeking inclusion in the EZ; countries with weak economies that did not meet EZ requirements might still be welcomed as members. This continuing debate over admission has forced theoretical and practical changes in how the EU and EZ are managed. I fear that the quest for a financially and politically united European continent is collapsing along with the Greek economy. It might be time for the EZ finance ministers to consider if  it can survive as a credible and viable institution if it must bailout the economies of some of its members. Recent events do not support the belief that Greece’s economy can be salvaged.  EZ members and the IMF in May of 2010 agreed upon a $146,2 billion three-year  bail-out package to pull the Greek economy from the jaws of default. The Greek government had to agree to austerity measures to receive the  first part of the monetary relief. Greek politicians agreed on the austerity  measures and a  part of the funds were released. It has been a year since Greece received the first installment of bail-out money. Unfortunately Greece was again looking into the jaws of default. Some experts questioned Greece’s effort to fully carry out the requested austerity measures. They argued that Greece misused funds and failed to follow EZ reporting requirements. This seems like a bad case of deja-vu . Once again lending authorities are demanding as a condition for the release of more funds that Greece sell off government-owned holdings via auction, carry out another round of austerity measures, and come into full compliance with accounting and reporting rules. I believe  that devaluating its currency would under normal circumstances go a long way to solving some of Greece’s economic problems. Regrettably Greece does not have a national currency. This is the price Greece paid for entry into the EZ.

To make matters worse many Greeks are not welcoming “more outside imposed austerity measures.”  Last month while Greek lawmakers debated and considered the E.Z.’s austerity measures protesters clashed with police outside the Parliament building. The news media broadcasted vivid images of the demonstrations. Greek Protesters.   In spite of this public uproar, the socialist  government of Prime Minister Papandreou obtained Parliament’s approval of the  austerity measures. The E.Z. Finance Ministers acted swiftly to this  development and released more bail-out funds to Greece. Now; the international community must hold its collective breath and wait to see if  Greece will actually carry out the austerity measures. Will the EZ demand a return of the its money if Greece fails to implement the measures?

The Greeks are a proud people and rightful so. Much of Western political thought, culture,  and philosophy were developed and nurtured during the Golden Age of
Athens. Yet, these incredible achievements were only possible because ancient Athens
had its finances in order, unlike its present day counterpart.

The time has come for Greece to abandon its sense of entitlement. For years many citizens of Greece have lived a somewhat carefree and spend-happy  lifestyle which has been financed by other nations. In my opinion it is just a matter of time before the credit rating agencies declare Greece in default.  This declaration will come. The Greek economy cannot financially support its  debt. A month ago Standard & Poor’s annouced that if the E.Z.’s  rescue plan was implemented Greece would default on its obligations Standard  & Poor’s. Now Moody’s Investors Services has downgraded Greece’s credit rating to one level about default Moody’s Decision

On Father’s Day I ate in a Greek restaurant in Astoria, N.Y.  At the table next to mine, there was a lively debate taking place about Greece’s  current economic problems. From what I could understand the debate was between first  generation Greek- Americans and their American-born children.  Without any warning I was thrust into the debate. They asked me for my opinion as a non-Greek  and I happily gave it.  The children simply argued  that Greece should voluntary default on its obligations and force a  re-negotiation of its debt. They suggested that Greece “should do what  Argentina did and refuse to pay” I pointed out that Argentina’s voluntary  default has not resulted in a Shangri-La for its citizens. In a well  written article that appeared in the New York Times, Charles Newberry
and Alexei Barrionuevo compare the consequences of Argentina’s default with  those of a possible voluntary Greek default Voluntary  Default . It is puzzling to understand why the EZ ministers are now championing  a “selective default” on the part of Greece.

The average person on the streets understands that a house without a strong
foundation will crumble and fall. The same is true of a country that has its foundation
built on a cliff that has been eroded by debt and fiscal irresponsibility. The  EZ must avoid allowing Greece to become its Afghanistan that endlessly  consumes resources.  We should stop making bad loans to Greece.  A Bad Loan

It might be time for the EZ to spin-off some of it members and deal with the
problems caused by a partial breakup. The spin-off option might be the lesser
of a number of evils.