Speculation Grows: Greece Will Default On Its Debts

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International lenders return to Athens next week to discuss the next installment of a vital $150 billion bailout. Otherwise, Greece will go broke and default on its debt. Meanwhile, there's growing resentment among Greeks toward their EU partners and many think default is not such a bad idea.


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.


SYLVIA POGGIOLI: The taxi driver's car radio is tuned to a news program. The voice is that of Kostas Skordas'. He's a former employee of the Greek Statistics Bureau who claims that European Union officials pressured Greece to revise and inflate its 2009 deficit figures in order to justify a desperate need for rescue loans.

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: Many Greeks say the country has to fend for itself and the D word, default, once a taboo, is being repeated more and more often.

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: The government has already slashed public sector wages and pensions and raised the value added tax a whopping ten percent ? from 13 to 23. One-hundred thousand small businesses shut down this year. And the EU is pressing Greece to lay off perhaps as many as 100,000 state employees and impose another 40 percent cut in civil servant's salaries.

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: The contagion has started, says Varoufakis, affecting Italy, Spain, and France. He says this will ultimately force the EU to face the core issue ? the lack of political and fiscal unity behind the euro, the common currency.

Sylvia Poggioli, NPR News, Athens.

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