If Germany abuses its momentary power, it invites its own destruction/FT 7-29-2015
July 29, 2015 10:48 pm
If Germany abuses its momentary power, it invites its own destruction
From: Mr. Daniel J. Aronoff
Sir, Greece’s former finance minister Yanis Varoufakis rails against the infringement of sovereignty imposed by the “troika” of lenders to whom Greece has become deeply indebted (“My plan to resist the troika’s attack on Greek sovereignty”, July 29). German finance minister Wolfgang Schäuble has argued that Greece’s lenders are enforcing contracts to receive back monies Greece willingly borrowed. From Mr Schäuble’s point of view, the creditors are acting within their moral and legal rights in taking action necessary to secure the repayment of their monies. Mr Varoufakis and Mr Schäuble are talking past each other.
The inescapable fact is that Greece cannot, and will not, pay off the debts it has accumulated. The Greek voter will not countenance handing over to foreigners a large share of the fruits of its labour and, if by some means it is forced to do so, its efforts will diminish. It matters not who is to blame for the present crisis. All that matters now is that debts must, and will, be repudiated.
Germany’s approach has an unfortunate analogy in European history; the crisis created by German reparations after the Great War. Only this time round Germany finds itself on the other side of the table. If Germany refuses to relent, Greece, and possibly the other indebted eurozone countries, will face the prospect of calamitous contraction — whether or not they leave the euro. If that occurs, it might pull Europe apart. That is why debt forgiveness is the only viable way forward to ensure the preservation of the European Union. If this fact is accepted by Germany and others, it would not be unreasonable for them to require that Greece undertake structural reforms to reduce its bloated bureaucracy, root out corruption inside its government and break up its oligopolistic industries. Greece needs to reform if it is to be integrated into Europe. Moreover, it would be equitable to require Greece to repay additional debt in the event its economy does resume growth. That way, its creditors would participate in Greece’s future prosperity, should it materialise.
To paraphrase Keynes’ observation of the Versailles Treaty, if the eurozone crisis is to end with Germany abusing its momentary power to force contraction on the debtor nations of the periphery, which are now economically prostrate, it invites its own destruction also, being so deeply and inextricably intertwined with the rest of Europe by hidden psychic and economic bonds. The advice proffered by John Kay in “What St Luke would say to Schäuble” (July 29) must be followed: “The starting point for any solution to the Greek crisis . . . should not be to ask who is to blame but what is likely to work.”
Daniel J Aronoff
The Landon Companies,
Birmingham, MI, US
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