When politicians do not know what to do, they hold a summit in the hope that the noise will be mistaken for action and the publicity of the event will mask the lack of ideas generated by it. The present meetings and statements about the crisis that is affecting Greece and the Euro is a case in point. There are no ideas except that the Greeks must make huge sacrifices to repay their debts.
Of course nations should repay their debts if they can. Our economic system is founded on people repaying what they have borrowed, but are economic system does not make that an inflexible rule, at least not these days. If you have more debts than you can repay you can make an arrangement with your creditors, because it is in everyone’s interest that every creditor gets something as opposed to nothing. If things have gone too far then you can declare bankruptcy, avoid your debts entirely and start all over again.
People that lend or provide credit understand these facts; they build into their loans or credit a margin to cover the risk of default. If things go wrong they lose the money they have lent or given in credit. Bankruptcy rules in most civilised nations do not allow creditors to lock up debtors, or take their beds, the food from their mouths or the tools of their trade. So it should be with Greece.
The banks and other lenders have already lost the money they lent to Greece. All the huffing and puffing of the creditors cannot change that fact. The solution for Greece is quite simple – recognise the actual position by declaring bankruptcy and give Greece a fresh start.
If the rest of the Eurozone nations think that such an action might affect their own economies then they could club together and figure out a solution which does not starve Greece in order to recover debts that are otherwise irrecoverable.
However, there is so much huffing and puffing by the politicians that the politicians may well blow the euro house down, if, as seems likely, the euro house is built of straw.