A just solution to the disaster enveloping Greece would involve a massive write-down of Greek debt. That is not going to happen, so in the upcoming referendum the Greek people are faced with a choice between two horrible alternatives. A refusal of the terms demanded by the Troika (European Union, which means mostly Germany; the International Monetary Fund, and The European Central Bank) would risk economic chaos if not total collapse in the very near future.   Acceptance would mean continuation of depression conditions for the indefinite future along with a humiliating, explicit cession of national sovereignty.

Who’s to blame for this mess? It is true that responsibility for the origins of the crisis belongs with Greek governments of both left and right, as Kevin Drum explains:

They borrowed way too much when their economy was booming; they refused to modernize their infamously porous tax collection, especially toward the rich; they lied through their teeth about their finances for years; and governments of both right and left have doggedly supported an insanely bloated public sector….

But even with all these transgressions, the Greek fiscal situation was far from disastrous. The conversion of “medium-sized fiscal failings” into a nightmare resulted from a complex of factors, among them: the straitjacket of a common currency, the Euro, which prevented Greece and other countries from using monetary policy for economic adjustment; the greed and selfishness of Europe’s economic hegemon, Germany; and above all, the dogmatic attachment of the powers that be, again under German leadership, to austerity economic policies that seek to cure the patient by making him sicker. The best short piece that I’ve seen for understanding the arc of the crisis is by Joseph Stiglitz, who faults the Troika for refusing to accept responsibility for the disaster it has inflicted on Greece, and instead persists in a stance that is unnecessarily, deliberately punitive:

…[I]t’s not about the money. It’s about using “deadlines” to force Greece to knuckle under, and to accept the unacceptable – not only austerity measures, but other regressive and punitive policies.

In short, it’s blackmail–the blackmail of a whole country.

But sometimes blackmail victims see no alternative to yielding to the blackmailer’s demands. So, what should the Greek people do in the upcoming referendum? Stiglitz and Paul Krugman have both suggested that a “no” vote would be the lesser of the two evils. I wouldn’t presume to make that choice for the Greeks. I do hope they vote no, because in doing so they would render a valuable service to a cause that is far larger than Greece. The cause would be resistance to Neanderthal economic policies that have denied not just Greece, but most of Europe a really healthy recovery from the 2008 financial crisis. As Krugman puts it, a “yes” vote

…would empower and encourage the architects of European failure. The creditors will have demonstrated their strength, their ability to humiliate anyone who challenges demands for austerity without end.

But I wouldn’t blame anyone for choosing not to become martyrs. The Greeks could judge that their immediate survival is too urgently at risk to think about the longer term, much less the broader cause.


  1. AS Gilbert July 3, 2015 at 12:33 pm

    Where is Odysseus when we need him again? This time, the Cyclops has three eyes (ECB, IMF, and EU). And like Odysseus, the Greeks today have to choose between Scylla (yes) and Charybdis (no) with no navigating between option.

  2. Jeffrey Herrmann July 6, 2015 at 2:37 am

    Well, the Greeks in an exercise of democracy have chosen by about 60/40 to probably impose economic catastrophe upon the 99 percent. (The 1 percent, including the very rich in-laws of one of the most prominent ministers of the current government, long ago got their money to Switzerland or Luxembourg.)
    It was dismaying to watch the current Greek leadership spin this in terms of honor vs shame; pride vs humiliation. Demagoguery manipulating democracy.
    The unavoidable facts are that when one borrows money and the loan comes due, the the options are 1) repay, 2) with the consent of the creditors, extend the loan, 3) borrow more and repay, 4) seek forgiveness from the creditors, and 5) default. If there are any other options, I haven’t been able to think of them.
    Option 1 was not possible. Options 2, 3 and 4 require a degree of altruism from the other 27 democracies of the European Union. Option 5 is the one in fact playing out.
    Should the other 27 democracies be altruists? Mario Renzi said he didn’t abolish early retirement with generous pensions in Italy just so the Greeks could continue to have them. He also said he didn’t impose substantial structural reforms to the Italian labor markets just so Greek shipping magnates could continue to pay no tax. Greek public employees were recently making on average 1.25 times what the average private sector worker made, and Tsipris rehired thousands let go by the previous government. Greek pensioners were getting two or three time as much per year as Eastern European pensioners. And so on, all paid for largely with other peoples’ (borrowed) money. How does this encourage altruistic feelings from the rest of Europe toward the Greeks?
    Sadly, many Greeks, including those who never supported their corrupt and irresponsible previous governments, will be badly hurt. It is childish to believe, however, that this is all because Angela Merkel is a devil.

    • tonygreco July 7, 2015 at 3:14 pm


      We clearly disagree on the relative blameworthiness of the parties involved. Unless you’re just overstating, you seem to absolve Merkel and presumably the Troika of almost all responsibility for the current mess. I think there is blame on all sides, but the balance of blame lies with the creditors and their political allies. As I indicated, the situation didn’t have to get nearly as bad as it has gotten; the fact that it has is mainly attributable to the stubborn, blind determination to impose a cure which, it should have been obvious long ago, isn’t working. In any case, this isn’t just a question of morality, or charity. It’s about the practical question of how to minimize the losses in what is in any case a negative-sum game. As Jeffery Sachs has observed, “…[C]reditors sometimes prevail to their own detriment; by pushing the debtor to the breaking point, they end up bringing about a complete default….[A] corpse cannot carry out reforms. That is why debt relief and reforms must be offered together, not reforms ‘first’ with some vague promises that debt relief will come in some unspecified amount at some unspecified time in the future.” I’ll have more to say on this in a future post.


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