Speculation Grows: Greece Will Default On Its Debts

Sep 21, 2011
Originally published on September 21, 2011 10:38 am
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STEVE INSKEEP, Host:

This week's global diplomacy here in New York takes place against a backdrop of economic anxiety. Lenders are preparing for another visit to Greece. They will discuss the next installment of a $150 billion bailout. Without the money Greece would default with unpredictable consequences for the world. But the bailout comes with conditions that Greeks increasingly resent. Some are telling NPR's Sylvia Poggioli that default is not such a bad idea.

(SOUNDBITE OF RADIO BROADCAST IN GREEK LANGUAGE)

SYLVIA POGGIOLI: It's claims like these that feed a sense that Greece has been used as a scapegoat for the global financial crisis. Nikos Frangakis, president of the Center for European Studies and Research, says anger is mounting against Germans pointing their finger at Greeks, repeating old stereotypes, but ignoring the fact that their economic strength is also due to Greek consumers.

NIKOS FRANGAKIS: And therefore they cannot easily swallow the German position, that, ah it is your fault, southern Europeans, that you're in default, therefore you should pay and don't expect the German taxpayer to cover your debts, because the German taxpayer has benefited as well.

POGGIOLI: At an Athens University cafeteria, medical student Evangelia Anghelina' describes the devastating effect of austerity measures on the Greek educational system ? no more books for high school students and more than 1000 schools have been closed. Anghelina' is the daughter of a plumber and a cleaning woman, and she fears the government will now impose hefty university tuition fees. She prefers default.

EVANGELIA ANGHELINA: I think that it will be a good idea if it's our decision, I mean the Greek people's decision.

POGGIOLI: Greek default is now openly debated. One of the most quoted economists is New York University's Nouriel Roubini, who describes the bailout as a rip-off and urges Greece to default. Greek Economist Yanis Varoufakis shares that view.

YANIS VAROUFAKIS: Greece must default, and the logic is very simple: when you have a huge debt buildup and a debt overhang following a financial crisis, it is impossible to repay your debts, even if you are extremely willing to do so, simply by cutting through austerity. Austerity will make the debt crisis worse, always has done, always will do.

POGGIOLI: Varoufakis is outraged by the divisions among the EU partners, and says their policies are just aimed at buying time. They refuse to acknowledge, he says, that the Greek crisis is just a symptom of a much bigger crisis within the European banking system.

VAROUFAKIS: Greece has not been bailed out, all the bailout money goes to the Greek state in order to repay the banks. Well, give it directly to the banks.

POGGIOLI: Sylvia Poggioli, NPR News, Athens. Transcript provided by NPR, Copyright NPR.