Back in 1979, then-President Gerald Ford reportedly told the city of New York to “drop dead.” The cryptic headline appeared in the New York Daily News the day following a speech in which Mr. Ford refused to sign off on legislation authorizing federal loans to a city on the verge of bankruptcy. In actuality, Ford never used those words. They were the paper’s way of paraphrasing the President’s decision using a bit of spiced up journalistic inflection. Ford took umbrage at the way the headline came across, later claiming it cost him re-election. He explained that the legislation lacked sufficient support for passage at that time. What was proposed could not save New York. In the following two months things changed.  Ford signed the bill and it took effect. New York City repaid the loan on time, including interest.

With Greece now on the road to bankruptcy, maybe someone should step forward from among the consolidated group of European lenders and play off of Gerald Ford’s words by telling Athens to “drachma dead!” What we get instead is day-after-day of the tired back and forth of lender insistence met with fingers-crossed-behind-the-back promises by Greece to do what it takes. Yes, Greece has achieved some small gains so far, including a reduction in the budget balance by around 8% since 2009. But small gains will not be enough as GDP fell by 6% last year and is on-pace to match that in 2012. Even the debt-to-GDP ratio going down to 120% by 2020 from the current 160% is speculative. It is a “political number” in the eyes of Financial Times writer Wolfgang Munchau in an article on February 12th.

Mr. Munchau’s article, “Why Greece and Portugal ought to go bankrupt,” unhesitatingly calls for the naïve, perhaps arrogant, European policymakers to stop kidding themselves. He says the policymakers thought they were being clever when they came up with the idea of expansionary fiscal contraction as a means to pull Greece out of the pit. All attempts we have seen since the May 2010 initial bailout have been unmitigated failures. Let them go under is the growing sentiment among northern European nations.

The belief among those who favor letting Greece and Portugal go under may have it right. Gerald Ford’s “drop dead” policy against New York City in 1975 suggests the possibility that Greece and Portugal can get their acts together by way of some introspective behavior modification through their own initiative. If Greece had been allowed to hit bottom early-on, some political house-cleaning and fiscal restructuring could have occurred by now. It would have paved the way for a massive infusion of outside assistance that was meaningful as reclamation rather than ransom. It would have eliminated a lot of nonsense.

After Ford refused federal assistance to New York, the city’s leaders from government, business, and labor took it upon themselves to save themselves. In a concerted movement, they changed the city’s destructive profligate behavior. They appealed to U.S. and foreign bankers who held hefty investments in New York City. The city’s default would have been costly to the banks. The city’s rescue operation was aided by New York state governor Hugh Carey. He called upon investment banker Felix G. Rohatyn.  Mr. Rohatyn summarized a possible default by saying it would be like “someone stepping into a tepid bath and slashing his wrists --- you might not feel yourself dying, but that’s what would happen.”

The prospect of imminent death led to renewed life for New York City. The Ford admonition is perhaps what Athens needs to hear from someone--- with a little twist: drachma dead!