The Greek bankruptcy

27 November 2012

The Greek bankruptcy

8th May, 2010 was the day when the SP voted against the aid package for Greece of €5 billion. The eurozone countries had to get their wallets out because Greece could not meet its obligations to private investors. ‘This aid seems aimed more at helping the banks than on helping the Greeks,’ said Ewout Irrgang, my predecessor as SP economics spokesperson. And so it turned out. The European billions took a quick turn around the Acropolis and disappeared straight into the pockets of the big European banks.

by Arnold Merkies

Arnold MerkiesThe financial sector has taken the easy way out, while 80% of the Greek debt is now in public hands. The biggest risk by far no longer lies with the investors who, conscious of the dangers, put their money into Greece, but with the peoples of Europe.

As early as May 2010, the SP was advocating a restructuring of the Greek debt. A year later, SP leader Emile Roemer said ‘A country that’s deep in debt, you don’t give it a new credit card.‘ And this is still as true. Greece is not being helped by more loans and ever harsher cuts. Even with the extreme austerity imposed on Greece by Brussels, in 2020 the country will continue to have an unsustainable debt.

An immediate annulment in 2010 of half of the Greek debt would have reduced sovereign debt to 60% of the country’s economy. This would have been a bearable amount which would have given the Greek people some prospects for the future. It would also have been a solution for Europe and given Greece the chance to rebuild its economy from the ground upwards, which would have been good not only for the Greeks, but for the rest of Europe.

The longer we wait, the more painful the solution will become. For that reason it would be much more intelligent to restructure the Greek debt right away, bringing it to a new, sustainable level. In the first instance that means a total cancellation of the remaining proportion, 20%, which is made up of private debts. Should it be necessary to restructure the public debt as well, this can only be done if the account is settled with the financial sector in a different fashion.

The muddling through scenario to which the Dutch government is willing to sign up is going to cost a great deal more money yet. We are now two-and-a-half years further on. Muddling through makes no sense. More loans and harsher cuts will deepen the crisis in Greece, increase the debt mountain and push back the real solution to the eurocrisis.

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