The Greek drama may finally be ending as soon as Monday, as end it must at some point.  Greece will exit the Euro, and the question is what will happen?  I don’t claim any special insight into what that will be, but there are a few points about this we should consider.

First, Greece’s problem is very simple:  they have spent far more, and more importantly, promised far more, than they can pay back.  Their debt to GDP ratio is ~180%, but with low financing costs (low interest rates courtesy of the world’s central banks), their interest costs are only about 2% of GDP, lower than many other countries.  Yet their public pension payments and ongoing operations cannot be funded with current tax revenues, therefore they must borrow and become increasingly indebted.  Unlike the U.S., and more akin to Illinois and Connecticut, they cannot print their way out of this since they belong to the Euro.  Further, the chaos and uncertainty have resulted in significantly shrinking their GDP, such that revenues have declined as well.  Austerity did include cutting spending, but also raising taxes.  The solution for Greece (as well as for the U.S., Connecticut and Illinois) is simple:  the public sector must go on austerity, while the private sector must be stimulated.

Which leads to the second point.  Stimulating the economy DOES NOT mean more government crony capitalism; it means releasing the death choke hold of government which is strangling the private sector.  As even the NYT writes, the problem is bureaucracy:

Yannis Stamatiou is one of this country’s many business owners who say Greece’s economic problems are not just about austerity.  Just ask him about the bureaucracy, which the new government has vowed to streamline but is a snarl of rules, decades in the making, that could prove hard to untangle.

Mr. Stamatiou recalls with disgust his trip last summer to a dingy tax office in southwest Athens. The large plastics factory his family has run for 40 years, which employs 150 workers and is one of the few to survive Greece’s wrenching economic crisis, was poised to get a rare bank loan. But because of a welter of changes to Greece’s tax rules in recent years, the tax official could not produce a critical document the bank needed to seal the deal.