If the E.U. is viewed as a remote and punitive body, one that can’t adjust its workings for a member country where a quarter of the population is out of work, its prospects are grim.
.. For Europe to return to the vision of shared prosperity on which it was founded, it needs to confront its debt crisis in a manner that offers all similarly afflicted countries—Ireland and Portugal, for example, as well as Greece—something more than the prospect of endless austerity.
It’s Time for Greece to Leave the Euro
Europe is a contract-based community of states that permanently agree on mutually beneficial rules, with the finest privilege (for those who do economically well enough) being membership in the euro club.
.. Greece made considerable progress on closing its deficits. Between 2010 and 2014 it implemented spending cuts virtually unprecedented in a developed country. Those cuts meant hardship to many in Greece. But they began to pay off: By the end of 2014, Greece was spending less than it was collecting in taxes (if you leave aside interest payments).
.. As childish as it sounds, Mr. Tsipras and his fellow fighters are still raging against the triviality that you can spend only what you earn.
.. over the past five months Europe has heard way too much from his government about the impossibility of further cuts and way too little about possible sources of new income.
.. To many Northern Europeans, both the Greek government and the Greek people have finally demonstrated that, according to them, no given rule is ever fixed. This mentality is not just alien to the rather Protestant northerners. It also holds a danger for Europe’s political fabric.
.. Unemployment in Italy, Portugal and Spain remains high, and anti-European Union populists are on the rise in all three. The conclusion that people there could draw from a third bailout program for Greece would almost certainly be that voting for radical parties and obstructive behavior are eventually rewarded. You just have to be cocky enough.
.. Europe could end up with a calamitous north-south divide along camps known from the Cold War: the “socialists” there, the “capitalists” here.
.. Yes, Greece still must be rescued. But no, it need not be rescued within the eurozone.
Who Owns Greece’s Debt
n 2015, the Greek Parliament set up a Truth Committee about the Public Debt to investigate how country’s foreign debt got accumulated from 1980 to 2014. The Committee has recently released a preliminary report which states that Greek public debt is largely illegitimate and odious. I would earnestly request readers to read this report as it confronts several popular myths associated with the Greek public debt. According to the report, the increase in debt before 2010 was not due to excessive public spending but rather due to the payment of extremely high rates of interest to creditors and loss of tax revenues due to illicit capital outflows. Excessive military spending also took place before 2010.
More importantly, the report reveals how the first loan agreement of 2010 was used to rescue the Greek and other European (especially German and French) private banks. The loan agreements of 2010 (and 2012) helped private banks and creditors to offload their risky bonds issued by the Greek government. In simple words, the debt of the private banks was transformed into public sector debt via bail-outs.
.. Out of €254 billion lent to the Greek government by troika since 2010, only 11 percent have been spent to meet government’s current expenditure.
.. It is pertinent to note that not just in Greece, the austerity programs also failed to yield positive results in Cyprus, Spain and Ireland.
Now Europe Must Decide Whether to Make an Example of Greece
German leaders genuinely believe that a new deal along those lines would be bad economic policy for Greece. Many economists at the International Monetary Fund and American officials would argue it is entirely sensible. The fact is that the time for those debates is over for now; we’re in a realm of power politics, not substantive economic policy debates.