2). What is the significance of the resent “no” vote?
A - The people of Greece are betting that the other countries in “The Euro” will either forgive all of their debt or significantly mark it down, which is d-e-f-i-n-i-t-l-e-y gonna happen.
3). In discussing the US national debt, one argument that I have heard (and personally advanced) is that sovereign debt is different than consumer debt. How does this difference apply in the case with Greece?
A - For Sovereign Debt, if a country (Greece) walks away from its debt, nobody gives a shit. If YOU walk away from YOUR debt, YOU and YOUR offspring, for 5 generations, will be hounded and their wages will be garnished until all principle, penalties, fines, interest and fees are paid, In Full.
4). How does this affect me, a middle-class professional in Texas? I’ve read that people’s 401Ks may be affected. Why? (I’m a public employee, so I don’t have a 401K.)
A - For you Texans, the price of Gyros is going up. For those whose money is in a 401k Plan and is invested in a Stable Market Fund, you’re fine. If your 401K funds are invested in Dolma futures, you may actually make a few Drachmas. If you’re a public employee with a pension, you’re fucked.
Can’t they choose to leave Greece in the EU but have it have its own currency, like the UK does? The eurozone and the EU are not the same thing, after all.
Point well taken. I think the problem is you cannot have an economics debate, in any form, without interjecting politics. They are, by their nature, intertwined.
Austerity measures have failed in Greece, and I don’t see how they will do any more good:
If the rest of Europe is truly interested in keeping Greece, who they welcomed with open arms when they were producing the big numbers, as a true partner, they will tell the bankers who made a few bad bets to fuck off and take their medicine. Maybe they can cut back on their corporate jet fuel, sell off some of their castles, I don’t know, lend a hand.
That’s one of the big problems: There is no legal process for leaving the eurozone. Nobody thought of that (or rather: they chose to ignore the issue). Membership in the eurozone is irreversibly connected to membership in the European Union. In order to leave the eurozone, a country would have to leave the European Union (which is possible).
One workaround that has been discussed is for Greece to leave the European Union (which would entail ditching the Euro) and immediately rejoin the European Union.
The Greeks have to pay back the loans in euros, not drachmas. Germany is the major creditor for the Greek debt, and they remember the economic history of the Weimar republic.
If you are interested in the origins of the crisis and have an hour to spare, This American Life and Planet Money teamed up to do a show on it: Continental Breakup - This American Life
This is from 2012, so it does not address the current state of play, but it’s very good.