Part two, Greece’s future: ‘There’s been enormous corruption, waste, fraud, and abuse’

World Finance speaks to Steve Hanke, Professor of Applied Economics at Johns Hopkins University, about Greece's debt problem

January 23, 2015
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Transcript

World Finance: Greece’s debt is largely believed to be unsustainable and unrepayable; is this the case?
Steve Hanke: They even have debt of €1.5bn that’s coming due in, I believe, the end of February. And it was supposed to be paid at the end of December! The EU looked the other way, and they’ve given them two extra months! And I think this will be a pattern that we will see with the debts that the Greeks owe to the Europeans.

part-one-greeces-future-eurozone-exit-would-be-a-disaster

Watch part one in our video series:

Greece’s future: eurozone exit ‘would be a disaster’

World Finance: Greece has a high debt-to-GDP ratio; is that necessarily a bad thing?
Steve Hanke: If there’s resources that you’ve been obtaining or put into productive projects and investments that make the economy boom, but that’s not the case with Greece. Most of this money has essentially gone down a black hole.

There’s been enormous corruption, waste, fraud, and abuse. Greece’s potential growth rate hasn’t approved as they’ve accumulated more and more debts.

World Finance: Well finally, Greece’s interest burden on its debt was around four percent of GDP in 2014 – lower than countries like Ireland and Italy. So should EU concerns really be focused on Greece?
Steve Hanke: The Europeans should be focused on trying to get some structural reforms. Right now they’ve been engaged in a very large bailout, and not much has happened, because the Greek public expenditure has not gone down since 2006 – it’s gone up by about 11 percent. And since the economy has shrunk, the public sector in Greece has actually increased in relative size, up to almost 60 percent of the total economy. So that has to be shrunk.

My contention is, my premise is, that the Europeans are more or less going to be forced to continue bailing out Greece. So if you’re bailing out somebody, you want to figure out how to stop the leaks in the bucket.