A lot of the blame for the present crisis should be borne by many countries and institutions, but the one group that is least responsible is the present left-wing government of Greece, Syriza.
The major blame must rest first with the previous Greek governments that mired the Greek people in corruption and cronyism. The second group that must bear immediate responsibility is the incompetence of the Troika – the EU, the European Central Bank and the IMF, led very much by the German Government. The austerity campaign inflicted on Greece has resulted in the GDP shrinking by 25%, accompanied by unemployment of 25%, and youth unemployment of 50%. Such a situation is unacceptable and is likely to result in extreme outcomes. Something just has to give in Greece.
In this situation there are now suggestions reported by the London Times that ‘Germany will demand the Greek Prime Minister, Alexis Tsipras and Finance Minister, Yanis Varoufakis, resign as a condition for a new Eurozone bailout.’ If this is correct it sounds very much as if regime change is being engineered. Is the object of such a plan to break the Greek Government so that the austerity plan of the northern European countries can continue? Such a plan is outrageous. These austerity plans have caused not only major social problems in Greece, but also in Spain where an election is due in December this year.
In retrospect, the Euro looks a bad idea, particularly when it links such diverse economies as Germany and Greece. Germany has gained economically from a weak Euro caused largely by the weak economies of southern Europe. It may not be overstating it to describe the Euro as really the Deutsche Mark in disguise. The Euro has given considerable benefits to German business and exporters. In turn, it has made southern European countries less competitive.
The austerity driven by the Troika with German leadership has resulted in political extremism of both the Left, as in Greece, and the Right, as in France.
For over a decade sensible economic management in Greece has been frustrated by widespread corruption and cronyism. Tax avoidance on a wide scale became acceptable by previous Greek governments. Urging Greece today to raise taxes to meet its budget deficits does not make a great deal of sense when so much tax is avoided. The crony friends of previous governments have become rich at the expense of the Greek economy and society.
The banks in Europe and in Greece have behaved irresponsibly with their loose lending. Just as it was incorrect to blame low paid Americans for accepting sub-prime mortgages, so the blame for borrowing by the Greek people cannot be sheeted home to poorly paid Greeks who needed credit to survive. It is noteworthy that in the present negotiations the banks have refused to include debt-relief as part of a settlement package.
Escalating public debt has been made worse by the irresponsible behaviour of that doyen of international finance, Goldman Sacks. In 2002 Goldman Sacks helped Greece to mask its true debt. Goldman Sacks persuaded the Greek debt managers that they could avoid Maastricht rules on budget deficit limits. The result of the Goldman Sacks device was that $1 b. did not show up in the Greek debt statistics.
The overbearing attitude of the victors after WWI imposed a severe burden on the defeated Germany which it never forgot, with appalling consequences. In the US, the US Treasury decided to let Lehmann Bros fail to teach the market a lesson. The Troika in northern Europe seems intent on teaching the Greeks a lesson.
Instead of their resolve to crush the Greek upstart government, the Troika in Germany should look at their own failures and also the long-term future of Europe. What has happened to ‘European values and solidarity’ that inspired Europe in the past? The Troika has a lot to answer for in the current crisis. Hopefully a resolution can be found that respects the rights of the Greek people and places Europe on a continuing path of development.
Surely in the cradle of democracy the Greeks will want more control over their own destiny!
See link below for an account by Jeffrey Sachs. He describes the behaviour of the Troika and others as ‘petulant, naïve and fundamentally self-destructive’. He adds that many of Greeks citizens are hungry, with conditions reminiscent of those in Germany in 1933.
Jeffrey Sachs is Professor of Sustainable Development and Professor of Health Policy and Management, at Columbia University. He is also Special Adviser to the UN Secretary General on the Millennium Development Goals.