Liam Dann: NZ should take lessons from worsening drama

Photo / APN

Flash points in the Greek financial crisis are like Christchurch aftershocks recurring with such frequency that it is sometimes hard from a distance to know which ones we should worry about.

But as talks come to a head in Europe this week it is safe to assume the latest crisis has potential to seriously rattle the global financial system.

German Chancellor Angela Merkel's reference, at the weekend, to a "Lehman Brothers" scenario won't have been made lightly.

Basically nothing that has been done to save the ailing Greek economy so far has worked and it is now back on the brink of debt default. If Greece defaults it is expected that major French and German banks will follow, triggering a continental sequel to the 2008 global financial crisis.

Europe's leaders are determined not to let that happen. Greece is still in the "too big to fail" category but given the political volatility of the ancient nation and the precarious financial position of other Eurozone countries it looks set to be a nerve-wracking week.

At issue is how much money Greece needs this time, who will pay and what conditions can be imposed on the nation to force it to bring this cycle to an end.

But asking how much bailout money is enough to solve a debt crisis is a bit like asking how much stop-leak fluid is required to fix a rusty old radiator.

If you are not prepared to replace the radiator then you are going to have to keep pouring the stop-leak indefinitely.

Unfortunately, political efforts to overhaul the Greek economy are creating enormous social unrest. The public, not without good cause, feel they've been let down by the politicians and bankers and are angry at bearing the brunt of extreme austerity measures.

Which ever way this plays out the Eurozone crisis should serve as a reminder to New Zealand that we must continue to move with some haste to rebalance our own economy.

The global finance crisis was never solved, it was contained to buy time for all of us - governments, banks, businesses and households - to deal with debt. Let's hope we've done that before the next big aftershock hits.