‘Placing EU in euro currency straitjacket made life impossible’

Austerity measures in Greece don’t work anymore, as the single currency put all EU countries in a straitjacket, and Greek olive oil is priced in relation to the prices of an export powerhouse, Patrick Young, expert in global financial markets, told RT.

RT:Can the eurozone afford to lose Greece? Would other states follow?

Patrick Young: Purely in economic terms Greece doesn’t demand too much. It is a basket case of an economy. Anyway it is only about 2 percent of the whole European Union economy. Even with the vast amount of money that is going in a bailout - something like €240 billion, it only owes the equivalent of about four percent of government spending throughout the eurozone.

However, politically the problem is that once the shoe drops, if Greece were to leave the eurozone then obviously the markets are going to start getting worried and they are going to approach all sorts of other nations around the Mediterranean that look somehow precarious financially. Whether it is Portugal, Italy, France, and Spain - they are all in danger once the shoe drops in Greece.

RT:The Greek general election is less than two weeks away. Do you believe Greece will be able to find its footing afterwards?

PY: I think it is going to be very, very difficult. Obviously we have the whole concept; Alexis Tsipras’ party is in the lead at the moment. They are utterly economically incontinent. Their latest election promises are: they are going to spend another €10 billion they’ve promised, which is other people’s money. It is not even Greek tax payers ‘money. It is German tax payers’ money they are looking now at the moment. Therefore, we found ourselves with this sort of Atlantean leap because ultimately Greece wants less austerity.

The difficulty is that less austerity for Greece means that everybody else in the Mediterranean is going to want less austerity too. Mrs. Merkel is fed up paying. German tax payers – they are owed effectively €700 per head. They are not happy either. And if we see anything being given to Greece then they are going to be expected to be given to all of these other nations.

It is an incredibly sticky situation because the Greek citizens themselves are being beggared by the EU. They can’t afford to go through this sort of austerity process they have. Ultimately they are going to be better off out of the euro. In this situation in the short- to medium-term nobody is going to win from this situation and it has a lot of worrying issues arising from it.

RT:How successful do you think European austerity has been?

PY: The difficulty looking back is that ultimately some element of austerity trimming, the amount of spending that government undertook in the postwar era in Europe has been a correct remedy. The difficulty is that placing everyone in the straitjacket of the single euro currency has made life impossible. We are pricing Greek olive oil in relation to the prices of an export powerhouse.

Therefore, Stuttgart, the home of places like Mercedes, BMW, and Munich just next-door are exporting cars effectively based on the weaknesses of Southern Europe. That single currency zone without being a political instrument simply hasn’t worked. We are in danger at the moment because the single currency causes all sorts of problems for a vast number of European citizens.

RT:How bad is the situation in Greece at the moment?

PY: The situation in Greece is a catastrophe because the Greek government has started taking its medicine. It hasn’t done everything but it has managed to raise some degree of taxation more than it previously got. Because tax payers were a little bit, how one say, relaxed about paying the taxation.

Government spending has been brought to book to a certain degree and they narrowed that down. The difficulty is because of this straightjacket of the euro currency, government debt has spiraled. The government of Greece owes 175 percent of GDP. A good marker is about 60 percent. So they are already three times over the danger zone. And that is why we’ve seen a history in the course of the last 100-200 years where Greece is consistently ended up having to default. We’ve got the same situation once again: Greece must default, it must exit the euro, it is going to have incredible short-term pain. But which is better? Is it better to have a quick crisis or to leave as they are at the moment like frogs being boiled in water consistently suffering pain with no resolution insight?

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.