There is apparently only one medicine for states suffering from a swollen national debt - austerity measures. Both unions and the financial sector are becoming more and more skeptical that this is the best antidote.
The Greek patient lies on his sick bed, moaning. The economy is shrinking. Jobs are being cut, and the population has taken to the streets in protest. The 'doctors,' sent by the EU, the European Central Bank and the International Monetary Fund regularly take the patient's pulse. And just as regularly they tell the patient he must make more of an effort and economize even more.
"Greece has a budget deficit of 15 percent of its economic performance and no access to capital markets," Ed Parker of the Fitch rating agency told DW. "Obviously, strict austerity policies are called for."
"The question is not whether, but how much has to be saved," adds Canadian economist William White. "If the medicine kills the patient, it's not doing its job."
For the past four years, Greece's economy has been on the decline. Entire trade groups are leaving the country. Spain and Portugal are also affected by the migration of educated, trained workers.
"If you hollow out the core of the productive force in such a manner that the patient threatens to die, it makes no sense to keep on administering more of the same medicine," White told DW.
Elga Bartsch, Morgan Stanley's chief economist for Europe, meanwhile, repeats a familiar mantra: Greece and other countries on the periphery of the eurozone must become competitive to allow their economies to grow again.
Before the introduction of a common currency, this could be done by devaluating the national currency, making a country's products cheaper abroad, and so more competitive.
"In a currency union, prices and wages have to be flexible, in both directions," Bartsch told a conference on state debt last month. "That's the only way to achieve the kind of adjustment that we used to achieve with an exchange rate."
The goal: lower wages
The high unemployment rate is putting pressure on wages. One out of five Greeks and one out of four Spaniards are unemployed. The rate is even higher among both countries' young people, half of whom are jobless.
The figures are alarming, but according to Charles Dumas, chairman of Lombard Street Research, a London-based investment consulting firm, the EU is only interested in austerity programs.
"That is fundamentally wrong and a complete travesty for the modern economy," Dumas told DW. "Such policies led to a catastrophe in the 1930s, when dictators took power in many countries: Salazar in Portugal and Franco in Spain."
The EU's enforced austerity programs has also created mass poverty, which the German government has to take the blame for, says Dumas: "After all, putting financial restructuring above all is based on a German initiative."
To make things worse, the austerity program hasn't had the hoped-for positive effect. "Last year, the budget deficit was at 11 percent of GDP. This year, we're expecting 10 percent," Dumas said. "But, as the economy has shrunk, so has the GDP. The Greeks are piling up more debt while the income they need to pay for everything has been shrinking." The result is inevitable, Dumas said: "Greek debt is worthless."
Once every three months, the eurozone states have to unanimously approve the next bailout instalment for Greece. But since the situation hasn't improved, it's only a matter of time before the mood among donor states changes. "By the end of the year, they will all be fed up and toss Greece out of the euro," predicts Dumas.
At that point, the much-discussed contagion sets in: first Portugal, then Spain and maybe even Italy – he believes they should all exit the euro if they ever want to grow again. "I believe that is the most probable solution to the problem," Dumas said with a smile. "Under the condition that the Germans don't reconsider and leave the euro first."
Author: Andreas Becker / db
Editor: Ben Knight