Greece Deal is Pyrrhic Victory, Says Schmidt
In an interview published in BU Today (July 17, 2015), Prof. Vivien Schmidt of the Frederick S. Pardee School of Global Studies at Boston University said that this week’s deal between Greece and the European Union (EU), which extends a third bailout to debt-ridden Greece, is a “Pyrrhic victory.”
“Far from solving the debt crisis, more austerity will merely prolong Greece’s 1930s-type depression,” Schmidt said.
Using an interesting metaphor, Prof. Schmidt says that being in the EU is “like belonging to a fraternity in which everyone gets hazed. You’re not going to let one young freshman who says I’m going to die…get out of being hazed.” However, she also outlines the dilemma for Greece, which is that “if it stays in the Eurozone, it’s subject to a massive loss of sovereignty.…If it doesn’t accept this, it’s in much worse shape if it leaves.”
Schmidt, who directs the Center for the Study of Europe at the Pardee School and is an expert on the European Union, explains that “the bailout was more about saving the euro, and thus stopping market attacks and contagion effects on other member states, than about Greece.” Some excerpts from the far-ranging interview on the situation in Greece and the implications of this deal:
“…ultimately, as the IMF itself has lately argued, debt forgiveness is necessary. Bankruptcy would be highly problematic, since it would mean that Greece would have left the Eurozone, with all the unforeseen circumstances surrounding that.
As for whether Greece needs regulatory reform, the answer is an unquestionable yes. Tax evasion is widespread, in particular among the wealthiest Greeks, as is corruption and trading in favors. Moreover, the economy is one of the most difficult in Europe in which to do business, given rigid rules, strong labor market rigidities, protected ‘closed’ professions, and a broken pension system.”
The full interview can be read here.