German economist says Greece is held hostage by banks

It is increasingly inevitable that Greece, already bankrupt, will at some point be forced to leave the euro. A German economist points out that the current crisis leaves the Greeks held hostage by the banks and financial institutions.

A top German economist, Hans-Werner Sinn, the head of German economic think tank Ifo, said on Monday "The Greeks are being held hostage by the banks and financial institutions on Wall Street, in London and Paris who want to make sure that money keeps on flowing from government bailout packages -- not to Greece, but into their coffers." In an enlightening interview with Der Spiegel, Sinn expounded on how the debated loan payment would be better spent propping up an orderly Greek exit from the euro rather than increasing the overall Greek debt burden which additional loans inevitably mean. The economist warned that if the loans are forthcoming they will assist only international banks and not the Greek people, an opinion expressed in a Digital Journal article. As the more Greece borrows the more it will spend servicing its debts, the cycle cannot be broken unless Greece becomes more competitive; difficult from the depths of recession and with the stranglehold of Greek red tape as yet unreformed by politicians who have shown a preference for maintaining the status quo in order to gain political favors, rather than tackling the underlying issues that stagnate growth. Sinn suggests a new solution to the Greek debt crisis. He advises that the bailout funds should be used to ease a Greek exit from the eurozone, effectively allowing the Greek government to use the cash to "nationalize the country's banks and prevent the state from collapsing." With an orderly default and devaluation it would be easier for Greece to become competitive again. The Greek unelected prime minister, former European central banker Lucas Papademos, favors Greece remaining in the eurozone even though austerity is not working and contributes to even further debt as it stifles growth. He depicts a scenario of chaos if Greece defaults yet does nothing to make an orderly default a viable alternative. According to the Telegraph the Italian prime minister Mario Monti has spearheaded a group of European leaders calling for proposals to stimulate growth in Greece, rather than just using austerity as the clearly unviable answer. As talks continue Greek Finance Minister Evangelos Venizelos said "The Greek people send to Europe the message that they have made, and will make, the necessary sacrifices for our country to regain its position of equality within the European family." His statement was made against the background of more protests against austerity measures. If the bailout loan is approved today or before the March deadline, it is increasingly inevitable that it will not be enough, and Greece will at some point have to exit the euro. The suggestion made by Hans-Werner Sinn to use the funds to ease an orderly rather than disorderly default appear the most viable solution against the lack of initiatives offered by Greek politicians prepared to hand sovereignity over in exchange for increased debt.