Peter Schiff shares his thoughts Greece’s capitulation and acceptance of a third bailout deal from Europe. He reviews some of the other options Greece might have had if it wasn’t run by a socialist government.
Highlights from the podcast:
“Greece is going to stay a part of euro, at least for now, because it is the only way they can get the bailout money they need to continue with Greek socialism. Of course, it will be mitigated to some extent, because they are going to have to comply with the demands to cut government spending. Of course, what they really need are larger cuts of government spending. What they don’t need are higher taxes…
“Germany basically showed that it’s willing to kick someone out, and just because you’re in the euro, doesn’t mean you’re in for life. They basically floated a plan over the weekend that said, ‘Look, we’re going to give them 5 year time out. We’re going to kick them out of the euro, and we’ll let them reapply in 5 years.’ By doing that, by showing other countries that just because you’re in doesn’t mean you’re going to stay in… It’s going to force some of these other countries to get their house in order…
“The best thing for Europe would have probably been to kick Greece out and not lend them anymore money. That probably would have been the best thing for the eurozone…
“I still think that any resolution of this crisis will be a positive for the euro relative to the dollar. I also think it will show people that the euro is here to stay… I think they have pretty much extinguished the risk [of a domino effect] for now. I think the message will be heard by other countries that they need to get their act together now, so they don’t end up in the predicament Greece is in…
“[Greece should have defaulted on their debts.] But if they did that, they wouldn’t have gotten another bailout package. Even if they got kicked out of the euro, that doesn’t mean Greece would have to abandon the euro. They have two things they could have done. One is they could have refused another bailout, defaulted on their loans, been kicked out of the euro – but still used the euro as their currency. Anybody can decide to use the euro as their currency… Greece could have continued to use the euro as its currency. It just would have had no access to the ECB for bailouts… Banks would fail… The government would have to lay off a lot of government workers, because it can’t afford to pay them… They would have to have substantial cuts to the pensions promised to retired Greek workers… The only euros the government would have access to were the ones Greek citizens paid in taxes…
