Dutch 11-Year-Old's Unworkable Plan To Resolve the Greek Debt Crisis

A blog about business and economics.
April 3 2012 11:20 AM

Dutch 11-Year-Old's Unworkable Plan To Resolve the Greek Debt Crisis

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A lot of people seem taken with 11-year-old (he was 10 at the time) Jurre Hermans’ plan for ending the Greek debt crisis. Admittedly, the kid drew a cute picture to accompany the plan and admittedly his plan isn't necessarily any less workable than what you hear from official circles in Germany, but this is actually a terrible idea:

Greece should leave the euro. How do you do that? All Greek people should bring their euro to the bank. They put it in an exchange machine (see left on my picture). You see, the Greek guy does not look happy!! The Greek man gets back Greek Drachme from the bank, their old currency.
The bank gives all these euro's to the Greek government (see top left on my picture). All these euros together form a pancake or a pizza(see on top in the picture). Now the Greek government can start to pay back all their debts, everyone who has a debt gets a slice of the pizza. You see that all these euros in the pizzas go to the companies and banks who have given loans in greece (see right in my picture).
Now here comes the clever part of my idea: The Greek people do not want to exchange their euro's for Drachmes because they know that this Drachme will lose its value dramatically. They try to keep or hide their euro's. They know that if they wait a while they will get more Drachmes.    
So if a Greek man tries to keep his euros (or bring his euros to a bank in an other country like Holland or Germany) and it is discovered, he gets a penalty just as high or double as the whole amount in euros he tried to hide!!! In this way I ensure that all Greeks bring their euros to a greek bank and so the Ggovernment can pay back all the debts.
I hope my idea helps you!!!! Of course if a country has paid back all his debts, he can return to the eurozone.
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What I like about this plan is that it addresses the issue that Northern European politicians claim is at hand. How can the Greek government repay its debts? Young Jurre, being 10, takes Northern European politicians at their word that this is the issue and has successfully outlined a plan whereby the Greek state can acquire an adequate quantity of Euros to repay its debts and then be free and clear of the Eurozone. The problem with the plan is that it doesn't actually resolve the economic crisis in Europe. What's going to happen is that Greek households and Greek firms with euro-denominated debts are now stuck with Drachma-denominated incomes and will all end up defaulting. And because this solution was imposed on Europe, lenders will rationally fear that it may be imposed on Portugal, Spain, Ireland, Italy or others. Private borrowing costs will skyrocket in all of those countries, crushing their domestic economies and making it impossible for those countries governments to collect adequate tax revenue to pay their bills. Now the exact same problem we were trying to prevent in Greece has recurred on a larger scale and nothing has been solved.

But don't blame Jurre for this. He's 11 years old and people are assuring him that the problem here is that the Greek state can't pay what it owes. His problem is that this isn't really what the problem is.

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