Painful Truth: Greece fights against debt bondage

Phrases you didn’t hear before the year 2000: viral video, unfriended, cord cutting, and important Greek election.

Not that national elections weren’t important to the Greeks themselves. But just like Canada, Greece is somewhere in the second or third tier of countries. 

A handful of big countries can change the world economy by fiddling with their interest rates, that can make or break international treaties, that can threaten war and send armies scrambling.

But Greece? Fewer than 11 million citizens. Centre of ancient and modern culture and art, yes, but not an economic or military powerhouse.

Yet the election of Alexis Tsipras as prime minister and leader of the Syriza party has sent shock waves through Europe.

Greece was one of the many, many countries that went a bit mad during the early years of the new century. Cheap money fueled foolish spending which fueled debts both public and private. That’s no different, really, than the story across most of the world. 

But when the crash came, when the U.S. housing bubble burst, it hit Greece very hard. They were part of the Euro community, using the same currency as France, Germany, Italy, and most of their European neighbours, giving them fewer options to pay off their debts.

Greece has faced more than five years of punishing austerity as they struggle to get out from under a 320 billion Euro debt. Unemployment is 26 per cent. Economic output has shrunk by 25 per cent. Social services have been slashed, minimum wages cut. It is not a fun time to be a Greek.

The Germans have been particularly adamant that Greece pay back its debts and cut its expenses, since they’ve shouldered a big chunk of the cost of bailing out their smaller neighbour.

Tsipras plans to reverse many of the changes that have been demanded as part of the austerity measures. The minimum wage will go back up, the sale of government assets has been frozen. Predictably, the markets in Greece have dropped.

But why should we pay attention to what the markets think? Didn’t they get us all in this trouble to begin with?

Tsirpas is still waiting to fight with the real monster, the noxious hydra he’ll have to slay to make his changes stick.

Greece is going to have to default on some of its debt.

In virtually any version of our economic system, debt is going to be a reality. For the economy to work, we need at least a reasonable certainty that people, corporations, banks, and nations will make good on their debts.

But it’s obvious that not everyone will. Sometimes, through incompetence or fraud or simple bad luck, there will be no repayment.

And we have to decide how to handle that.

The Greeks are probably aware of how it used to be dealt with – in ancient Athens, people who couldn’t pay their debts were sold as slaves. Centuries later, most of Europe hosted debtors’ prisons. We now allow people to declare bankruptcy, rather than enslaving or imprisoning them.

So if individual punishment (beyond a ruined credit rating) is inappropriate when it comes to debt, why is it okay for Europe and the IMF to collectively punish the Greeks? Because they are being punished, whether they spent the fat years recklessly spending, or if they were frugal savers who paid their mortgages on time every month.

After all, it hardly seems appropriate to blame the Greeks for their mess, when thousands of bankers and traders lied, schemed, grew massively wealthy, and got off Scott free.

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