Goodbye Euro, Welcome Back Drachma

The Greek debt is an enormous debt and the Greek economy is in a very bad shape.

720 people are losing their jobs daily and half a million businesses have closed down since 2009. Although, a lot of this was the result of the debt bubble bursting (pre eurozone GDP stood at 150B appr.), it is important to point out that this huge volume of contraction puts the whole economy at risk.

The Greek economy will not be able to sustain such high debt payments as it contracts. At present, 16 billion euros or one third of its net government income goes towards debt servicing. With the debt rising and GDP shrinking, the debt servicing costs will deduct larger and larger chunks out of the overall net government income making debt servicing an impossible task.

The Greek state will be unable to run basic services soon, putting large parts of the population at risk through collapsing health care, education and pensions. If situation in Greece has not entered third world conditions already, it will soon do as the Greek state, starved from tax income, will fail to meet the country's basic needs.

That is why it is imperative to put the needs of the economy ahead of the debt servicing liabilities. And Greeks need to do it themselves as there is little appetite in Brussels for this. Brussels' insistence on austerity despite the alarming collapse of the Athens Stock Exchange indices is so shortsighted and unproductive that bears wondering if Brussels are at all in touch with the harsh Greek reality. Or if they care at all...

It is not surprising that no party in Greece supports the Memorandum as is right now. All parties have incorporated some form of plans to renegotiate certain terms of the bailouts to the benefit of the Greek economy. And they have to. This blindfolded approach to austerity needs to end or the Greek tragedy may have a very ungly end indeed to the detriment of the Greek people.

A strong Greek government needs to negotiate the harsh terms of the bailout but choose to exit if the European creditors don't see the urgency for a change in policy and focus in Greece.

TP 1:20AM June 10, 2012