The online journal Foreign Policy is prestigious but hardly known for promoting a radical stance. This article puts to the sword both the Samaras government and its German backer Ms Merkel. A SYRIZA victory according to this article is not another option – its more like a necessary risk.
Debt relief isn’t just a matter of justice. It’s an economic necessity. Contrary to the propaganda from the EU and Samaras’s government, Greece is not putting the crisis behind it….
Without debt relief, the economy looks set to remain depressed. While it has scope for a bounce from its depths, a sustained recovery strong enough to make up lost ground, put Greeks back to work, and bring down debt is not in the cards. Even at its current annual growth rate, the economy would recover to its 2008 level only in 2030. Domestic demand is depressed by the debt overhang, while exports remain weak. Even with imports suppressed by crunched incomes, the country is running a whopping (and widening) trade deficit. The banking system is bust. No wonder businesses aren’t investing.
Nor has Greece fixed its fundamental flaws. Despite all the talk of reform, the EU’s priority has been austerity and wage cuts. The corrupt, clientelist political system remains intact. Politically connected businesses continue to have a stranglehold over cartelized markets. The rich still don’t pay their taxes. Re-electing Samaras and his New Democracy party won’t change any of that.
Nobody knows how an untested Syriza would behave in government… But since Tsipras’s movement does not have a stake in the clientelist system, it might actually follow through with its reform pledges. And on the key issue of debt relief, Syriza is Greece’s best hope.
If Merkel were wise, she would make a virtue of a necessity and offer Greece debt relief as a gesture of solidarity. She must know that if the euro ultimately collapses, Germany will be blamed — again — for wrecking Europe. The chancellor could call on historical precedent: West Germany’s debts were slashed in 1953 through the London Agreement. She could even throw in a Marshall (or Merkel) Plan of investment for Greece and other crisis-hit countries that would also boost German exports.
Unfortunately, that is highly unlikely. Because of Merkel’s mistaken bailout of Greece’s private creditors in 2010, German taxpayers would lose out if Greece’s debt were cut. Since Germans self-servingly believe that as creditors they are virtuous, they feel no obligation to be generous to Greeks whom they view as sinful profligates…
So Greece needs to stand up for itself and demand a negotiated write-down, backed by the threat of unilateral default. It can credibly do so: Since Athens has a substantial primary surplus, it would not need to borrow if it stopped servicing its debts. Syriza says it won’t write down bonds held by private investors, so Argentina-style legal entanglements aren’t a concern. With the bonds held by Greek banks untouched, the European Central Bank could scarcely refuse to accept them as collateral for liquidity. Meanwhile, German threats to force Greece out of the euro are probably bluster: Merkel has no legal right to deprive Greeks of the use their own currency, and it is implausible that unelected central bankers would dare splinter the eurozone. So Tsipras just needs to control his spending urges and stand his ground.
Will this cause upheaval? No doubt. Could it go horribly wrong? Of course. Is it necessary? Absolutely. Choosing the “safe” Samaras option would condemn Greece to continuing misery.
Full article here