‘Greece Should Default Instantly,’ Economics Professor Says
The euro is rallying on fresh hopes that Greek politicians can agree to austerity measures that could secure them a much-needed second bailout from their euro zone peers.
On Wednesday, political parties in Greece were again going to try to agree on tough reforms needed to obtain a second bailout which would help the country avoid a messy default.
But according to one Greek economics professor, the country should simply default as soon as possible to provide some kind of relief to the region’s debt crisis.
“This bailout is certainly not the answer for anyone, for Greece, for the euro zone, for the world,” Yanis Varoufakis, Professor of Economics at University of Athens, told CNBC. “Greece should default instantly, immediately, without any talk of leaving the euro .”
“Here we have a typical bankruptcy problem which we’ve had for two years now,” Varoufakis said.
According to him, Greece’s first bailout back in May 2010 was not the illiquidity problem leaders perceived and they should stop “throwing good money after bad,” ballooning Greece’s deficit and “destroying the economy” thereby leaving it incapable creating income to repay its debt.
“Why can’t we (Greece) default within the euro zone?” Varoufakis said, noting that the country has already been frozen out of the money markets.
“The only reason for taking on more loans is if we think that by doing that then we can repay them. We can’t and everybody knows that. The European Central Bank knows that. The International Monetary Fund knows that,” he said.
The ECB and members of the euro zone must decide to “end the political lunacy” and be willing to accept the inevitable Greek bankruptcyand not “push it under the carpet like children trying to avoid a spanking,” Varoufakis said, adding that this won’t happen and another bailout is inevitable.
“Greece is going to go further into the coma in which it finds itself and the euro zone crisis is going to escalate and reach an even more advanced stage of disintegration,” he said.
Varoufakis likened the situation to the 1929 Wall Street crash where the “common currency of the era”—the gold standard—“simply disintegrates and then very soon after that you have a Hobbesian war of all against all.”