Thursday, July 9, 2015

Germany's Double Standard on Debt

 By Reginald Johnson


              It was good to see Greek Prime Minister Alexis Tsipras yesterday rebuke the representative of Germany in the European Parliament over the issue of Greece's debt.

          Germany, France and other members of the Euro Zone have been acting indignant over Greece’s inability to pay back loans made by Euro Zone members, as well as banks and the International Monetary Fund.

   German officials in particular have been insisting that the debts must be repaid, despite the harsh austerity Greeks have been enduring in recent years. They say that the Greek demands for debt reduction and more favorable repayment terms are out of line. In a referendum last weekend called by Tsipras, Greek voters decisively rejected plans for more austerity in return for more loans from the EU.

  German EU member Manfred Veber accused Tsipras of having misled Greek voters, destroyed trust in Europe, and insulted other leaders.

    In a speech seen on Euro News, Tsipras responded,  “I want to remind you, Mr. Veber, that the strongest moment of solidarity in Europe was in 1953 when your country came out indebted and looted after two world wars and Europe and all European countries showed the greatest solidarity in a 1953 London agreement and they decided to write off 60 percent of the German debt and agreed to a growth plan. That was the greatest moment of solidarity in recent European history.”

   Tsipras, other Greek officials, as well as some notable economists such as Thomas Piketty and Richard Wolff, have recently been pointing out the German hypocrisy on the issue of Greece’s debt. In fact, Greek officials said earlier this year, that Germany had still not paid Greece for the agreed-upon debt from World War II. Under the Nazi regime, Germany invaded and occupied Greece during the early 1940s.

   Piketty, who rose to prominence last year with a book on inequality, told the German magazine Die Zeit: “When I hear the Germans say they maintain a very moral stance about debt, and strongly believe debts must be repaid, then I think, what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.”

  Greece now owes in the neighborhood of 350 billion euros, on loans made by governments, private banks and the International Monetary Fund. In return for bailout money, Greece agreed to an austerity program involving wage and pension cuts and service reductions. The nation’s economy has gotten worse and Greece is virtually bankrupt.

  Following the referendum on Sunday, Greek and EU officials have been meeting to try to arrive at some sort of agreement where Greece will get more bailout funds and possibly a long-term debt reduction, or “haircut.”

  Even IMF leaders said in a recent report that the terms of debt for Greece had been too harsh, there had been negative results, and that a debt reduction is now needed.

   But German Chancellor Angela Merkel isn’t budging, saying on Thursday that debt relief was out of the question.

  If an agreement can’t be reached, Greece would be forced out of the Euro Zone and credit would be cut off. The nation would then have to print its own money.

  Greek banks reportedly only have enough money to last until Monday.

 James S. Henry, an economist, lawyer and senior fellow with Columbia University’s Center for Sustainable International Investment told the CounterPoint radio show on WPKN that it was time for officials of the EU and the European Central Bank to stop being so hard-headed about Greece, and work out a more favorable deal for that nation.
  “Any settlement has to contain debt relief from an objective standpoint. The current debt level is not serviceable,” he said.



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