Theodore Katsanevas

Paul Krugman, writes that “Fifteen years ago Greece was no paradise, but it wasn’t in crisis either. Then Greece joined the euro, foreign money poured in, the economy boomed, inflation rose; and Greece became increasingly uncompetitive. The Greeks squandered much of the money that came flooding in, but then so did everyone else who got caught up in the euro bubble. And then the bubble burst and the whole euro system became all too apparent. Why does the dollar area — more or less work, without the kind of severe regional crises now afflicting Europe? The answer is that we have a strong central government, which in effect provide automatic bailouts to states that get in trouble. The origins of this disaster lie north, in Brussels, Frankfurt, where officials created a deeply — perhaps fatally — flawed monetary system. And the solution will have to come from the same places. Greece does indeed have a lot of corruption and a lot of tax evasion and the Greek government has had a habit of living beyond its means. Beyond that, Greek labor productivity is low by European standards — about 25 percent below the European Union average. However, that labour productivity in, say, Mississippi is similarly low by American standards. On the other hand, ,the Greeks aren’t lazy — on the contrary, they work longer hours than  anyone else in Europe, and much longer hours than the Germans in particular. (see Histogram 9). Nor does Greece have a runaway welfare state, as conservatives like to claim; So how did Greece get into so much trouble? Blame the euro”[1].

Hans Werner Sinn states that “Greece caused a great damage to itself when it entered the euro zone, because the euro created an inflationary bubble, which stole the country’s competitiveness. A minimum of 50% unemployment in young adults and 25% in general population is the major terrifying consequence. Leaving the euro zone and devaluing the national currency would result in import decrease and export growth. Greek consumers will have to turn to domestic products and this will create new work positions. Greece could also develop its agricultural sector in particular, as Israel, which exports its products all around Europe. Moreover, the assets of rich Greek citizens, who have transferred at least 100 billion euros abroad to secure them, would return to Greece. When everything is less expensive, they will want to re-invest in their country. This could lead to a rapid revival of the construction sector and within one or two years, more job openings would be created. In the long run, Greek industry, which was once fully functional, could be reconstructed; only this time it would be more modern and adjusted to the new age requirements. Almost all debt crises are solved through haircuts and national currency devaluations, so I cannot see a reason why Greece should be the exception to the rule. Greek people, who currently suffer from mass unemployment, would be the most benefited from this devaluation. Today’s course in the eurozone favours only big investors in Greece and abroad, while it further encumbers Greek people. Through a haircut, the European countries will just revoke claims that they cannot collect in any way. This has no relation with the issue of exiting the euro zone. The sooner they see the truth, the better. Greece can once again stand on its feet and become competitive, only through a Grexit.[2]

Javati Ghosh underlines that “the humiliation of Greece today will come back to torment European leaders tomorrow. The co-operative ideal of a united Europe is demolished forever, and the reality of the project as a measure in the interests of finance capital, enforced by the German state and fundamentally at odds with any real attempt at people’s participation, is now laid bare. So there’s now no question about it: this European marriage will not last. At least three reasons make this denouement inevitable. First, a monetary union without some modalities for fiscal transfers cannot last because the requirements placed on deficit countries to adjust are too severe and essentially unachievable; yet the pressure in Europe are pushing towards the opposite of fiscal union. Second, this strategy in any case generates severe deflationary pressure in which the only impulse for expansion must come from outside, that is net export growth, and even that cannot prevent stagnation, which means worse labour market conditions, worse prospects for the young, more inequality and so on. Third, the growing tension between these institutions and popular reaction cannot be completely controlled by finance capital and its agents. The political tensions can be expressed from the left or the right but they are definitely growing across Europe and sooner or later they will find some reflection in policies. In the current context that implies not greater integration but disintegration in Europe. The only questions now are: how long will it take before the breakdown becomes explicit? How much more pain and violence will be forced on people across Europe before that final break? And how long will German government bullying in the interests of finance capital be tolerated by the people of Europe and ultimately by the people of Germany themselves?(Ghosh,J.2015)”[3]

Noam Chomsky has pointed out that, “Greece must stop implementing Brussels’ policies   which   have led to the increase of the Greek debt. Fifty present   of young people are unemployed and around 40% of the population lives below the poverty line. Greece is being destroyed,” he said and supported that, the Greek debt should be written off in the same way the German debt was written off in 1953, just eight years after the end It is hardly the final word, even for Greece. The mountain of debt in Greece is simply too big and the country is not competitive. Indeed, it’s going to be very difficult to keep Greece in the euro zone[4].

Keneth Rogoff supports that “in order to make Greece competitive wages would have to be halved. That is impossible to implement politically, but without a steep wage cut, the economy will continue to stagnate. Greece urgently needs the prospect of growth. It is currently experiencing its fifth consecutive year of recession. This is a failure of historic dimensions….The problem in Greece is not an ordinary recession but a full-blown financial crisis, something which countries usually take a lot longer to recover from. This kind of economic collapse goes much deeper than a normal slowdown. … The tragedy for Greece is that it borrowed heavily in the good times of the early 2000s, even though it already had a high debt to GDP ratio and could have used its fast growth rate as an opportunity to reduce the burden of its debt, not to increase it.  Instead, like many countries, its governments borrowed what they could, and the combination of the Great Contraction and the revelation of massive accounting fraud shut the door on private lending. Relative to other countries that have found themselves in debt crises, Greece was able to lever its position in Europe into a two extraordinarily massive (by any measure) bailout programmes meant to provide the country with funds while it reformed its economy and its government budget. But as a member of the EU, Greece could not devalue its currency and reform has been enormously difficult politically. And while in some ways Greece has gotten a good deal, its bargaining partners have of course been focused on their own welfare and political problems. The mistrust of the Greek government by its European bargaining partners but also crucially by its own citizens, has made a turnaround slower and even more painful than in other Eurozone countries[5]”.

Paul Craig Roberts says that, “Greece is being looted like a colony of the private banks, which is what it is. Previous Greek governments accepted bribes to indebt Greece to private banks. For example, someone would come from Germany and say, «Let us make you this nice loan so you can buy German submarines, and here’s a bag full of money for agreeing.» This is the way much of the Greek debt was built up. Normally in the past, when governments had excessive debt that they couldn’t service, the debt was written down to an amount that could be serviced. For example, when Mexico couldn’t pay in the 1980s, the debt was written down, and the US government came up with Brady bonds, which was a way of writing down the debt. But now that looting is completely unleashed; the rule is that if a government can’t pay, the people have to pay, and the way they have to pay is to accept cuts in their pensions, cuts in employment, lower wages, cuts in social services. And they have to sell off their municipal water companies, their ports, the state lottery. This money is then used to pay the private bankers that lent the governments money that did not really benefit the people very much, but benefited the foreign recipients of the loans. This is a looting process; it’s the way that the colonialists looted the colonies in Africa and Asia, and now what we see is that the West is looting itself, and this all happens because the people accept it. Even when they protest, they don’t go far enough. We have here a situation where the Greek people don’t even understand what they have to do to save themselves and to be independent .The only way Greece  can get its sovereignty back is to leave the euro and to bring back its own currency and use its own central bank to provide the country’s money, and not rely on German and Dutch banks or on Goldman Sachs. There is no such thing as an independent, sovereign country that cannot create its own money”[6].


[1] Paul Krugman, The N.Y. Times, 17/6/2012

[2] Sinn H.W. (April 2013).Greece should exit the Eurozone as soon as possible and be offered a return ticket, also interview for the daily newspaper Kathimerini, 18/1/2015.

[3] Jayati Ghosh is one of the world’s leading development economists. She is now Professor of Economics at the Centre for Economic Studies and Planning, School of Social Sciences, at the Jawaharlal Nehru University, in New DelhiIndia.

[4] Noam Chomsky interview to Euronews, April 2015,  also in Greek Reporter, 20/4/2016

[5] Keneth Rogoff, The Modern Greek Tragedy, VOX CEPS’s Policy Portal, 10/6/2015

[6] Paul Craig Roberts, Interview to Michael Nevradakis,