Does the term "sovereign nation" mean anything to you?
Do you feel an obligation to pay for the debts of Greece? No? Then why would a German, or me as a Dutchman feel such an obligation?
Do you feel an obligation to pay for the debts of Greece? No? Then why would a German, or me as a Dutchman feel such an obligation?
As a result, we don't have to "bail out" Mississippi so much as continually pay for its mismanagement.
And so, again, isn't "paying for mismanagement" part of what you sign up for when you try to unify Europe?
No, you tried to do that 203 years ago, but we burnt down your White House.
I'll give you that you unified somewhat less than half of the continent though. ;-)
In other words, if you ask whether the EU aims for a single financial and regulatory regime the answer is "yes and no"
Very few current EU countries signed up for a "unification of Europe", it started as a trading bloc and escalated from there.
For the Euro to work, the rich member countries must be willing to accept massive transfers from countries like France and Germany, to the Mediterranean countries. In addition, the ECB must be a lender of last resort.
Seeing as none of these criteria are currently (formally) met, the Euro can't function. The only way it could work was if the economies of the member states quickly converged. They didn't.
As for Germany... as Piketty told Die Zeit, Germany never repaid its debts and has "no standing to lecture other nations." They're hilariously wagging their fingers at far more responsible people. (https://medium.com/@gavinschalliol/thomas-piketty-germany-ha...)
What that implies to external financing negotiations is that even if Greece's debt is forgiven (economists from across the spectrum seem to agree this should happen), unless Greece adjusts its fiscal policy --- inconveniently, to something more akin to what Germany is demanding --- the bailout just delays the inevitable.
What do you think about points like: "I am much more afraid that the conservatives, especially in Germany, are about to destroy Europe and the European idea, all because of their shocking ignorance of history. [...] Look at the history of national debt: Great Britain, Germany, and France were all once in the situation of today’s Greece, and in fact had been far more indebted. The first lesson that we can take from the history of government debt is that we are not facing a brand new problem. There have been many ways to repay debts, and not just one, which is what Berlin and Paris would have the Greeks believe."
Or how about the fast way for a state to leave delinquency: "Germany proved it in the 20th century. Essentially, it consists of three components: inflation, a special tax on private wealth, and debt relief."
Have you read David Graeber's book which he recommends elsewhere ("Debt: The First 5000 Years") which covers how debt is just a promise, and it's fetishized (more than say promises from politicians to their constituents) when it's a promise from the weak to the powerful?
I'm not moralizing debt. I am, however, according sovereign states and their constituent organizations the agency to decide whether or not to finance other sovereign states.
However much honor you accord to debt service, the prospect that (expensive) debt forgiveness will simply generate the need for more debt forgiveness in the future is actually material to the question of how to finance Greece.
(I am, in this instance, parroting something Tyler Cowen wrote yesterday; not that I agree with Cowen on everything [I'm not a libertarian].)
As for Greece's finances, that's exactly what the negotiations are about. A political issue. (After all, money is a purely social construct, not some law of physics. Underlying it is power relations and violence.)
Greece isn't simply arguing that, morality being relative and all, they've decided not to pay back their debts.
They are demanding more money from their creditors. It seems like they have to: they're running a primary deficit; they're losing money even before you take debt service into account.
Whatever the moral dimension of paying back their debt is has nothing to do with the question of whether Germany (ie, the EC) or the IMF (to whom Greece just defaulted) or the ECB (which doesn't want to be in this particular lending game to begin with) is going to give them more money.
If Greece can't persuade the EC, IMF, or ECB to lend them more money, it's doesn't look like they can just walk away from this whole scenario. "Oh well! Debt is just politics and morality!" That might be true, but if they want to allow people to retire in their early 60s, or pay half the nominal tax rate, or not regressively tax the poor through punishing VAT increases, they're going to need to convince someone in the world of some kind of compatible morality, right? They require additional financing, don't they?
The current hovernment wants to add at least 30% debt reatructuring (which Germany says it s off the table) and pay back only when reasonable primary surpluss has been achieved.
I think the history is full of misinterpreted debts, especially Germany's (Versailles > WWII...)
But I think one basic understanding of debt should not be discredited:
There's a difference between ...
- A debt that was agreed upon by both parties in a free market (Greece defaulted on that in 2012)
- A debt that was agreed upon by both parties's representatives as an act of embezzlement - i.e. favoring Europe's banks/Greek oligarchy (Greece is about to default on that right now)
- A debt that was agreed upon by the winners of a war over a defeated country
You can say what you want about a "level playing field" not being in place when battered Greece gets to negotiate with its Creditors, but even trying to compare that with a war-looser situation is disingenuous.
Enjoy the reading. Oh feel free to share the take-away.
Does the term European Union mean anything to you? Does the term common currency mean anything to you? If Greece fails, Do you really think Germans won't suffer any consequences?