Will the saga of Greece and its unpaid debts ever come to a resolution?
Greece's government has decided to put the latest EU bailout package up to a referendum of Greek voters — and good for them. But if one thing is sure, it's that if Greeks vote "yes" in Sunday's referendum — as in, yes, they'll take Europe's money, but with all the terrible strings that are attached — their crucifixion will not end in the foreseeable future.
Greece simply cannot pay back its debts. In the real world, when a company or an individual simply cannot pay back its debts, the creditor agrees to a restructuring of the debt, simply because there is no choice. It's the rational course of action. The U.S. government, the IMF, and many independent economists and experts have agreed that this is the best course of action for Greece, too. It is only Greece's European creditors who do not agree, who insist that Greece pay back all the money, and that it enforce draconian austerity measures so that it can do so.
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That's a big problem. As long as Greece is forced to pay back its debts like this, its economy will never rebound.
Many commentators have framed this as a moral or ethical issue — and they are right to do so, since Europe's prescription consigns countless Greeks to needless economic suffering. But the issue is logical, too: As long as Greece's economy is depressed, it will not be able to generate the revenue sufficient to pay the debts! Europe's course of action is inherently flawed to begin with.
If anything, the best argument for staying the current course is not economic, but moral: Greeks have been too reckless for too long, and if they're not forced to pay back their debts, it creates a moral hazard, because their bad behavior will have been rewarded. This argument is not without merit. Greek society has had tons of problems, including with shameful things like corruption. And yet...
Greece's debt binge was also enabled by the euro, which depressed Greece's borrowing rates considerably. These low rates were premised on the idea that any individual government would be bailed out by the rest of the eurozone, since the euro created solidarity between member states. It wasn't just Greece's lavish spending or tampering with the books that created this crisis. Who loaned them the money in this first place? The euro created a huge credit bubble in Europe's southern economies, because they were not ready for such low interest rates. Is this something "the Greeks" should be blamed for? When there is a crisis, one always looks for a scapegoat. But that is immoral.
The "moral hazard" argument had a lot more going for it in 2009, or even in 2012. But at this point, the Greek people have been through seven years of economic depression. How long must they be punished pour encourager les autres? When does it end?
Greeks haven't just spent seven years rioting (though they have done that). Some real and needed structural reforms have been instituted. (Does Greece need more? Absolutely. But it doesn't justify bullying them into it.) There has been tremendous progress on issues like corruption and tax evasion. The Greek government now has a primary surplus, meaning it can pay for itself out of revenue minus its existing debt, meaning it now runs a tighter ship than France, or really any other country besides Germany.
The big stick the eurozone is wielding in these negotiations is ejecting Greece from the euro. But let's face it: Ejecting Greece from the euro is the best thing that could happen to Greece. It would allow Greece to restructure its debts. It would allow Greece to finally become competitive again through devaluation, which would boost its economy (particularly tourism). It would be painful and chaotic and dangerous in the short run, no doubt. But if they stay with the current course, Greeks are going to go through a lot of pain and chaos with no end in sight.
Does a "no" vote guarantee a bright future for Greece? By no means. It might mean leaving the euro, which would mean a lot of short-term pain (though probably long-term success). But one thing is certain: If the "no" vote doesn't guarantee a bright future, a "yes" vote guarantees endless pain.
Greeks have gone through a lot. I hope they have spine, and that they use it.
