It could well be a plot from the pages of an Aeschylus play. After weeks of difficult negotiations, leaders of euro zone economies prepared a plan to prop the tottering Greek economy. Now, Greek Prime Minister George Papandreou, fighting for his political survival, wants to subject the plan to a referendum where it faces defeat.
There could be nothing more reckless than that. If the plan gets a political boot, it could well tip the world into a recession.
Greek Prime Minister GeorgePapandreou. Photo: AFP
Given the extent, scale and nature of the current crisis, counter-cyclical policies are unlikely to work and a depression could be a possibility. If that happens, trade as we know it is likely to be hit hard. Domestic sources of growth will gain far greater salience than ever before. India needs to prepare hard for that possibility. At the moment, with its poor mix of monetary and fiscal policies, it is in no position to withstand the coming challenges.