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Chris Giles’s piece on Greece unquestioningly parrots its eurozone creditors’ position. Stop. Little could be further from the truth.

Nobody denies Greek governments were profligate. But reckless borrowers require reckless lenders. It is those reckless private creditors who were bailed out by eurozone governments and the International Monetary Fund in 2010: nine of every ten euros lent to an insolvent Greece since then went to pay back debt that should have been restructured. Because of eurozone governments’ refusal to accept a restructuring of Greece’s debts in 2010, the austerity subsequently imposed and the depression that this caused were unnecessarily great – perversely causing public debt to soar as a share of Greece’s shrivelled GDP. One quarter of positive growth after a collapse of GDP of 21 per cent over five years – a cumulative loss of more than 100 per cent of Greek output – scarcely vindicates the creditors’ strategy.

Yes, Greece’s debts have since been restructured – but not enough to make them sustainable. This is a moving target, because the conditions for EU-IMF funding cause its debt burden to keep rising. And the debt overhang stifles investment because, with creditors breathing down the government’s neck, businesses fear punitive tax hikes. The overhang also causes crippling uncertainty about how it is going to be resolved, stunting growth. The creditors have exacerbated this by wrongly claiming that default implies Grexit. Yet there is no legal basis for this claim: it is blackmail, as Alexis Tsipras rightly says – as is capping emergency liquidity to Greek banks, forcing Greece to impose capital controls and limit bank withdrawals.

I don’t speak for Syriza. But Yanis Varoufakis is very clear that Greece doesn’t want additional funding from its creditors. After all, since Greece is broadly at primary balance, additional funding is solely needed to refinance old debt, to maintain eurozone creditors’ pretence that Greece is solvent. Syriza wants relief so as to make Greece’s debts sustainable, regain market access and escape from misrule by its incompetent and self-interested creditors.

That debt relief would impose losses on European taxpayers – not just Germans but also poor Spaniards and Slovaks – is deeply unfair. But their democratic wishes were violated, and those losses imposed, when Angela Merkel, Jean-Claude Trichet and other eurozone leaders together decided to breach the Maastricht Treaty’s no-bailout rule and lend taxpayers’ money to an insolvent Greece in 2010, ostensibly out of solidarity, but actually to bail out French and German banks. Those losses are sunk: debt relief merely makes this transparent to voters – hence why Merkel is so desperate to avoid it.

Greece is not a “misbehaving child”, as Giles calls it. It is infantilised by its creditors’ unwillingness to release it from debtors’ prison, leaving it dependent on them for conditional liquidity. As adults, Greeks need to regain control over their destiny. Let them then hold the Syriza government accountable for its decisions at the next election.


Clarification: Chris Giles claim he did not call Greece a “misbehaving child” and that this is a “smear”. The relevant paragraph is below, so readers can judge for themselves.

In another act of solidarity, creditors have made it perfectly clear that further debt relief will be on offer once Greece implements the lending conditions to which it says it agrees. This is a perfectly sensible attempt to reward good behaviour on the principle that you do not give treats to a misbehaving child.

Posted 03 Jul 2015 in Blog

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