Europe could be torn apart by divergent perspectives on debtIf what counts is what works, then the Greeks did the right thing by rejecting austerity at the ballot box. After years in which the servicing of debts has been pursued to the exclusion of every other objective, it has plainly not worked. A quarter of the economy has disappeared and half of young citizens are workless. To cap it all, the debt burden itself did not fall but instead grew to reach 175% of GDP. If that doesn’t constitute failure, then what would? To have kept doing the same thing, while expecting different results, would have been madness.But in Amsterdam, Berlin or Helsinki, the demands of Alexis Tsipras for a “viable, fair, mutually beneficial” way out of the debt crisis may also seem to express delusional disregard for experience. Greece has already received two big bailouts. If its new prime minister is now to be allowed to wriggle free of commitments given by his country, then what reason will it ever have to learn to live without the begging bowl? And why should other indebted states do anything other than demand similar favourable terms, or themselves elect populists promising to make unpleasant obligations go away? Writedowns for Greece might be affordable because of its small size, but the sums would soon change if accommodations had to be reached with Sinn Féin in Ireland and Podemos in Spain. Continue reading...
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