Can an entire government go bankrupt and be bailed out? As Greece is currently showing us, fiscal and monetary policies are no laughing matter. If government spending does not get reigned in, national debts can cripple more than the governments that cause them.
The Mediterranean nation of Greece has defaulted on several of its loans. Beforehand, it maintained the second highest debt to GDP ratio in the EU. Many northern EU states blame the problem on over-expansion of the EU, and wish for tighter financial control of the other member states.
The Greeks should have looked to GM and the financial industry as an example of how to get out of faulty business practices. Oh wait.
In order to remedy the situation, which has made the Euro drop dramatically since November of last year, the Grecians have requested a bailout package to finance their debts. The vast majority of Germany opposes such action (most of the EU rides on the country’s economic coat tails), but there is little doubt it will participate in the bailout.
As of April 23rd, Germany’s Chancellor Angela Merkel said Greece was discussing the situation with the International Monetary Fund, and that Germany funding would depend on the outcome of such talks. Merkel herself has stated that bailout of Greece is “necessary to ensure the stability of the Eurozone”, but that such assistance will only occur once Greece has finished its talks with the IMF.
If GM is any indicator, it does not matter how many times an organization gets bailed out. Serious budgetary reforms need to be made, and unfortunately a bailout only sets the precedent that faulty business can continue – other people will simply resolve the situation.
Greece should be given gradual aid, conditional upon their improved financial responsibilities. The aid should also be paid back to the EU with interest. In other words, Greece should be punished for its lack of fiscal responsibility, not bailed out.
Perhaps this methodology is not as pragmatic as it should be, but the idea that governments can and do default on their debts is an interesting fact. Our own Congress should look at Greece as an example of what useless government spending can do not only to its own country, but to other nations tied to its currency.