Is Greece Leaving The Euro The Best Thing For The FTSE 100?

A Greek debt default needn’t damage the FTSE 100 (INDEXFTSE:UKX).

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What is the greatest danger in the world today? Disease? War? Terrorism? No to all of these; I think it is debt.

You know, I feel sorry for the Greeks. They are a good people. It is not by chance that this was the birthplace of democracy and debate. They have a sense of what is right and what is fair. Instead of bluster, they discuss and reason about everything.

Governments must balance their budgets

Everyday there are more dramatic headlines about what is happening to this country; but this is not really about headlines. What the Greek people have been through over the past five years has been nothing short of horrific. People have lost their businesses, their jobs, their homes and their families.

Yet another bailout looms for Greece. The conditions stipulated are at least impossible. Greece’s debt is now reaching somewhere near a google. I think this is getting silly.

Linear thinking is very common. You try something; it works. You try it again; it still works. So you keep doing the same thing. But at some point it will stop working. So you stop doing it.

It is now Greece’s third bailout. The national debt of Greece is estimated to be 344 billion euros. The population of Greece is 11 million. That’s quite a lot of debt, for a small country without the economic firepower of the major nations.

How could this country be allowed to rack up such a huge credit card bill? Beats me.

And you see, the way to prevent this sort of thing is ridiculously easy: just balance your budget. Governments should not be allowed to produce budgets which are not balanced. Full stop.

Racking up debt is akin to being a drug addict. And Greece has taken so much, it is now in the emergency room. This means it now needs emergency measures. Bailouts just won’t cover it.

Greece must leave the euro

Greece has to leave the euro. It has to default on its debts. This will mean the economy will be frozen out of the debt markets — people won’t be able to take out mortgages or loans or make credit card purchases. But this is preferable to a country’s spiral into what is basically oblivion.

This has to be done as gently as possible so that it doesn’t go into shock. But it has pretty much been expecting this for the past five years. And if Europe and its banks pull together, I am hopeful there won’t be systemic effects on the global financial system, including the FTSE 100.

The country will see itself as destitute; and, to some extent, it will be. But it will get through it. I suspect it may take a decade, but Greece will improve, recover and eventually strengthen, helped by a weak drachma which will draw tourists and companies.

The world is watching this. And it should be. Because Greece must tell the world about the dangers and the horrors of debt.

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