In the five years (!) that have passed since the euro crisis began, clear thinking has been in notably short supply.
… Recent events in Greece pose a fundamental challenge for Europe: Can it get past the myths and the moralizing, and deal with reality …
First, about those myths: Many people seem to believe that the loans Athens has received since the crisis broke have been subsidizing Greek spending.
The truth, however, is that the great bulk of the money lent to Greece has been used simply to pay interest and principal on debt. In fact, for the past two years, more than all of the money going to Greece has been recycled in this way: the Greek government is taking in more revenue than it spends on things other than interest, and handing the extra funds over to its creditors.
Or to oversimplify things a bit, you can think of European policy as involving a bailout, not of Greece, but of creditor-country banks, with the Greek government simply acting as the middleman — and with the Greek public, which has seen a catastrophic fall in living standards, required to make further sacrifices so that it, too, can contribute funds to that bailout.
One way to think about the demands of the newly elected Greek government is that it wants a reduction in the size of that contribution. Nobody is talking about Greece spending more than it takes in; all that might be on the table would be spending less on interest and more on things like health care and aid to the destitute. And doing so would have the side effect of greatly reducing Greece’s 25 percent rate of unemployment.
But doesn’t Greece have an obligation to pay the debts its own government chose to run up? That’s where the moralizing comes in.
It’s true that Greece (or more precisely the center-right government that ruled the nation from 2004-9) voluntarily borrowed vast sums. It’s also true, however, that banks in Germany and elsewhere voluntarily lent Greece all that money. We would ordinarily expect both sides of that misjudgment to pay a price. But the private lenders have been largely bailed out (despite a “haircut” on their claims in 2012). Meanwhile, Greece is expected to keep on paying.
Now, the truth is that nobody believes that Greece can fully repay. So why not recognize that reality and reduce the payments to a level that doesn’t impose endless suffering? Is the goal to make Greece an example for other borrowers? If so, how is that consistent with the values of what is supposed to be an association of sovereign, democratic nations?
The question of values becomes even starker once we consider why Greece’s creditors still have power.
…
I’ve read, listened to journalists telling lies, with the sole purpose of selling the European Union’s ( right-wing ) faulty view of the situation. No wonder the vast majority of europeans still think the crisis was caused by governments’ wrong doing.
The deceit boggles the mind.
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