One of the assumptions of the eurozone – those
19 countries in Europe that use the euro as their national currencies – is that
if any country left the zone, economic disaster would follow in its wake. Only a few days
ago, it appeared that heavily indebted Greece might be forced to drop the euro
and return to the drachma, the currency it used before the euro.
During the 1990s
and early 2000s, Greece was spending money like a sailor on shore leave with a
limitless credit card. The government ran up debts amounting to hundreds of
billions of dollars to prepare for the 2004 Olympics, among many other
infrastructure projects. It also promised retired Greek citizens some of the
cushiest pensions in the EU.
In 2002, Greece was
among the first EU members to adopt the euro. Entrance into the eurozone was
contingent on Greece's accomplishing certain reforms and demonstrating a
threshold level of economic prudence. Among the requirements was to maintain a
budget deficit of less than 3% and a total government debt under 60% of GDP.
Greece never even
came close to meeting these targets. To make it look as if it were, Greek
politicians engaged in such sleights of hand as not counting military spending
as a government expenditure. But if it wanted to join the euro, Greece needed
to do more. And Greek politicians weren't about to ask voters permission to
dismantle the cradle-to-grave welfare state financed by borrowed money……
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