Treating Greece like an incorrigible child won’t improve its economy or the future of the eurozone.
“German Patience with Greece Wears Thin,” says the New York Times headline. My patience with the mainstream media also wears thin. Like a bad parent, Germany scolds Greece for something its constant beatings basically forced it to do. The media buys into Germany’s logic. Were high-pressure tactics to adopt punishing austerity cutbacks ever going to encourage Greek solidarity and social peace? Is the parent who beats the child ever going to encourage obedience and healthy behavior? Psychology has taken us a long way past the value of spankings to instill constructive attitudes. It seems not so for the Germans, although it should be said that not all of them agree with their prime minister, Angela Merkel, and government officials.
Are the Germans actually trying to get Greece to leave the euro? If so, they are probably underestimating the turmoil that would cause. On the other hand, it may be getting to the point where it is a better option for the Greeks to incur the possible closing of financial markets should they adopt a new drachma, which will quickly fall in value. They will not pay their debts to German banks and others in full-fledged euros. But they can start to determine their own fate and work with what industries they have. Their export sector is not as weak as people seem to think.
Germany’s basic refusal to take responsibility for its contribution to this situation continues to be stunning. First, it exploits a fixed euro that is too low given its competitiveness—much like the Chinese do and the Japanese did before them. Then its banks lend willy-nilly to the nations who are buying its exports, disregarding the quality of the loans and prospective inflation. (The Chinese similarly buy U.S. debt.) Third, it demands harsh cutbacks in Greece if the bad boys want money to pay their loans back. Which makes matters worse. Across the nations that have adopted austerity, debt as a proportion of GDP is higher than it was during the recession.
Spanking doesn’t work. Calling Greeks irresponsible time and again doesn’t work. It is also only partly true. Not all Greeks lied about their former finances, only the right-wing party in power at the time did. The Greeks work hard and they work many hours a week.
But the angry reaction to austerity is utterly, laughably predictable. To act as if the Germans have done everything right and the Greeks everything wrong is preposterous. When the media give credibility to these insinuations and implications, they should be called to task. We are suffering the worst economic leadership among rich countries in our lifetime. The Germans responsible should not be proud to be head of this class.
And, by the way, a letter in today’s Financial Times rightly points out that many Germans are voting in increasing numbers against the Merkel-esque politicians. It is not all Germany’s fault, just like it is not all Greece’s. And there are ways out, as I have discussed in this space many times.