The Real Greek Solution: A Military Coup

Posted: athenswire

October 26, 2011

There’s a not very funny joke going around the financial markets at the moment, that the real solution to the Greek problem is a military coup. Instead of Germany trying to fund the Greek debt they should instead sponsor such a coup:

Only half in jest is it sometimes said that a better use for Germany’s money than pouring it down the drain of further bail-outs would be to sponsor a Greek military coup and solve the problem that way…..

The reason being that a military dictatorship cannot be in the European Union. Thus, if there was such a military coup Greece would immediately have to leave he EU and thus whatever happened to its economy would simply be someone else’s problem.

What’s so sad, or bitter if you prefer, about the joke is that, if we ignore the little problem of it being a military dictatorship, this would in fact be a good solution to Greek woes. They simply cannot, under and circumstances, pay the current debts so they’re going to have to default. But default in itself doesn’t solve the major problem, which is that they’re caught in a monetary union at a price which makes Greek labour woefully uncompetitive.

Which means in turn that Greek wages, Greek living standards, have to fall in order to make that labour competitive. Or, if you prefer, Greek labour productivity needs to rise very strngly and very quickly. Either path is extremely difficult and painful. The third alternative is for Greece to leave the currency union and then devalue the New Drachma.

However, the way that the European Union and the eurozone are set up a country leaving the monetary union would be considered to be a shocking defeat for the whole European ideal. What the military coup would allow is, as I say ignoring that little detail about it being a military coup, what should probably happen and would certainly be the least painful way for Greece to deal with its problems: default and exit from the euro.

That we have to joke about such horrible things as a military takeover though does show quite how dysfunctional European politics has become. No one really wants to talk about a dictatorship as the solution to a fairly simple economic problem but that is what we’re reduced to as the current system simple will not take that reasonably simple solution seriously.