Wednesday, February 10, 2010

Are the (Greek) Poor Better Off Now?

So Greece (and Italy, Spain and Portugal) have followed the compassionate script to the letter and cut their defense spending to almost nothing and boosted their social spending to the moon. They ended deep in debt to the point where a financial crisis is pushing them to the edge of sovereign debt default.
BERLIN—Germany is considering a plan with its European Union partners to offer Greece and other troubled euro-zone members loan guarantees in an effort to calm fears of a government default and prevent a widening of the credit woes, people familiar with the matter said ...

Mr. Schäuble told officials in Berlin on Monday that he had concluded there "was no alternative" to a rescue plan, according to a person familiar with his comments.
Emphasis mine. If these nations default or if they just try to get a handle on their debt servicing responsibilities, the budget slashing will go way beyond the cold-hearted levels of the past.

Will the Greek poor be better off because the government was compassionate?

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