On Saturday, the German minister of interior, Mr Hans-Peter Friedrich, became the first member of Merkel's government who began to publicly defend the removal of Greece from the eurozone. It's not too long a time ago when Merkel herself warned that the decay of the eurozone would mean the eruption of a continental warfare. I've been hearing similar alarmist rubbish just months before Czechoslovakia was split without a single broken window.
Elli Paspala: Summertime in Prague. Years ago, Greeks used to be happy, loving, and rich without a dime when they could only afford the cheapest wine and hotels in Prague. Frankly speaking, most Czechs can't afford to live even in cheap hotels. ;-) After decades of a welfare state, Greeks are generally hated fat pigs who live in expensive hotels but they keep on complaining.
Herr Friedrich denied that he demanded that Greece had to be removed from the eurozone. He only said that others have to create the kind of incentives for Greece to leave that Greece won't be able to refuse. What can the incentives be? For example, I answer, Greece may be promised that there won't be any football boots imprinted in their lazy and pushy buttocks and there won't be any war conflict against Greece that Greece would be guaranteed to lose.
Hans-Peter Friedrich is a member of CSU, the Christian Social Union, the smaller and more conservative (despite the name) Bavarian sister of CDU, the Christian Democratic Union; the latter operates in the rest of Germany.
Of course, Bavaria is the Bundesland that most Czechs are most familiar with – at least among the Bundesländer of West Germany. We drink the same kinds (and amounts) of beer and some of the old people listen to the same traditional Volksliede. My uncle and lots of other emigrants lived in Bavaria (Nuremberg in his case) etc. Before the German Empire was established, the interactions between Bavaria and our empire, Austria-Hungary, were intense. Finally, the word "Bavaria" probably boils down to "the home of Boii" [Celtic tribe], the very same definition as "Bohemia". There is some uncertainty about the exact location of the Boii's home but it was somewhere here. ;-)
I am amazed how much attention is dedicated to the euro, a failed currency. Many of us have been saying that the euro was a bad idea for years – because the eurozone isn't an optimum currency area and this problem will exist even if and when Greece is removed from the eurozone.
But at the end, the euro is just a damn unit of money. You can express your wealth or debt or income or prices in European euros or American dollars or Greek drachmas or Czech crowns or German marks but what actually matters is whether the debt/salary/whatever is large or small when converted to some predetermined units via the market exchange rates.
Greece is a failed nation that won't be able to restore its fiscal balance even after something like 50% of their annual GDP was (or soon will be) subtracted from their debt – a staggering amount. The debt as expressed in euros actually understates how impossible it is for Greece to repay the debt, even after it was lowered. The debt seemed to be "only" 160% of their GDP because the GDP was artificially inflated: the Greek "product" was obtained as the sum of prices of goods that are not competitive and can only be sold to other Greece who are living out of other nations' money.
But for Greece to regain competitiveness, the prices, salaries, and other things have to drop to something like 50%. This will inevitably reduce their nominal GDP as well – to something like 50% of the inflated pre-crisis value. This drop of "real" (translated to other currencies via current market exchange rate) prices and salaries, whatever is the unit, will mean that the debt will be about 320% of the GDP. Even if you erase 40% of it or whatever, it will be impossible to repay it. If the debt were kept in the euros, which is the only fair choice, the debt of a stabilized Greece will be 320% of their GDP whether or not they switch to a national currency.
It's a country that has been living light years beyond its means – parsecs away from any reality -– for years if not decades. The debt of other nations is excessive as well but there is no second Greece in the contemporary world.
In David Černý's sculpture called Entropa, the provocative symbol of the H1 2009 Czech EU presidency, currently located in Pilsen's science museum "Techmania", Greece is represented as a forest that has burned out completely. Even though the sculpture was created a year before the modern Greek debt crisis exploded, the artist already had a good intuition about the "spirit" of that country, and others.
Of course that the debt will have to be liquidated in one way or another. Someone will have to pay for it. The creditors will lose most of their money. They can lose it by being told that they will only receive the expected amount of Greek euros, not real euros, which may be worth €0.40 or something like that. It's clear that the creditors won't like it because it's really fraud – and obviously, rating agencies would have to classify this reduction as a default, anyway – but the bad news has to come in one form or another.
I think that it would actually be unfortunate if the moment of Greek bankruptcy occurred when Greece is outside the eurozone because the conflicts about the question whether the debt is €350 billion or γ€350 billion which is just €100 billion would poison everything. Greece has been using the euro as its main currency for years so this is the unit in which everything related to the default should be settled.
In the long run, Greece must either reduce its nominal salaries etc. to 1/2 of their current (or 2010) value, or it must switch to a national currency whose devaluation will have exactly the same "real effect" as the nominal decrease. For a rational person, it wouldn't really matter how they do it. If the Greeks were rational, they could undergo the badly needed transformation in the units of the euro just like in the units of a drachma. Whatever the unit is, it's still true that it's necessary to reduce their real salaries and pensions and special fees for pedophiles and pensions for the deceased people and all the other things that Greece is paying – as expressed e.g. in the U.S. dollars – to something like one-half of their current value.
This won't mean that the living standards will drop by 50%. They may only drop by 30% or so because the prices will also drop as the expenses decrease together with the incomes of the employees etc. For all those reasons, I think that it wouldn't be important for a rational nation in a similar situation to leave the currency union. It may only be necessary to expel them from the eurozone – and maybe the EU – because it is not a rational nation. It is a nation of brainwashed freeloaders who apparently can't understand that they're living well beyond their means.
Germany seems to be split about the Greek exit from the eurozone: only 53% of the German citizens want Greece to be expelled, according to polls, while 62 percent oppose a new bailout. The public opinion isn't split in Czechia, however. Polls indicate that 97% of Czechs think that Greece must leave the eurozone: 82% think that it should only be kicked from the eurozone while 15% think that Greece should be expelled from the European Union, too. I probably count myself among the 15%, too. Still, I believe that Europe or NATO will have to be active in Greece in one way or another, anyway.
In another poll, 95% of Czechs (including me) say that Europe should no longer pump the money to Greece.