Greece’s perpetual crisis

Yanis Varoufakis / www.project-syndicate.org –Since the summer of 2015, Greece has (mostly) dropped out of the news, but not because its economic condition has stabilized. A prison is not newsworthy as long as the inmates suffer quietly. It is only when they stage a rebellion, and the authorities crack down, that the satellite trucks appear.

The last rebellion occurred in the first half of 2015, when Greek voters rejected piling new loans upon mountains of already-unsustainable debt, a move that would extend Greece’s bankruptcy into the future by pretending to have overcome it. And it was at this point that the European Union and the International Monetary Fund – with their “extend and pretend” approach in jeopardy – crushed the “Greek Spring” and forced yet another unpayable loan on a bankrupted country. So it was only a matter of time before the problem resurfaced.

In the interim, the focus in Europe has shifted to Brexit, xenophobic right-wing populism in Austria and Germany, and Italy’s constitutional referendum, which brought down Matteo Renzi’s government. Soon, attention will shift again, this time to France’s crumbling political center. But, lest we forget, the inane management of Europe’s debt crisis began in Greece. A minor country in the grand scheme of things in Europe became a test case for a strategy that could be likened to rolling a snowball uphill. The resulting avalanches have been undermining the EU’s legitimacy ever since.

The problem with Greece is that everyone is lying.

The European Commission and the European Central Bank are lying when they claim that the Greek “program” can work as long as Greece’s government does as it is told.

Germany is lying when it insists that Greece can recover without substantial debt relief through more austerity and structural reforms.

The current Syriza government is lying when it insists that it has never consented to impossible fiscal targets.

And, last but not least, the IMF is lying when its functionaries pretend that they are not responsible for imposing those targets on Greece.

When so many lies – with so much political capital invested in their perpetuation – coalesce, disentangling them requires a swift coup, akin to Alexander cutting the Gordian knot. But who will wield the sword?

Tragically, the problem is both obvious and extremely simple to solve. The Greek state became insolvent a year or so after the eruption of the 2008 global financial crisis. Against all logic, the European establishment, including successive Greek governments, and the IMF extended the largest loan in history to Greece on conditions that guaranteed a reduction in national income unseen since the Great Depression. To mask the absurdity of that decision, new loans – conditioned on more income-sapping austerity – were added.

When one finds oneself in a hole, the simplest solution is to stop digging. Instead, Europe’s powers-that-be, the Greek government, and the IMF blame one another for driving Greece’s people into an abyss.

Greece is the immediate victim, and it is therefore the Greek government’s responsibility to cut the Gordian knot, by declaring a unilateral moratorium on all repayments until substantial debt restructuring and reasonable fiscal targets are agreed.

Greece’s voters twice gave their leaders a mandate to do just that: once when they elected the Syriza government in January 2015, and again that July in a referendum. For the sake of Greece – and of Europe – the authorities need to call a spade a spade.

Full article here