As in the aftermath
of World War II, the Allies, remembering the disastrous consequences of German
reparations after the First World War, did not insist on their pound of flesh
as Germany and the EU does now with Greece.
The entire Nazi
public debt, amounting to over 600 per cent of German GDP, was written off.
Further the German
Federal Republic itself, after 1989, did not condemn former East Germany to
austerity as a remedy for its fictitious communist economy. Instead, Chancellor
Helmut Kohl allowed the eastern states to exchange their nearly worthless
Ostmarks for Deutsch Marks at the inflated rate of 1 to 1, and then poured the equivalent of more than a trillion Euros into the reconstruction of the eastern
economy.
Germany lived well
beyond its means during the Nazi era, plundering the rest of Europe as well. If
Germany had practised what they are now preaching for Greece, Germany today
would be a much poorer country.
So now let’s couple
Greek budget and tax reform with a large infusion of funds for economic
modernization and public improvements in the spirit of the Marshall Plan and
how it helped Germany after WW2?
Not with more
funds but by writing down the Greeks EU debit by half so today and in the
future Greeks young and old, instead of looking at 40 per cent unemployment, could gain productive jobs.
And the entire
Greek economy would gain a big macro-economic boost and a path to greater
competitiveness within the EU.
Similar to how
Germany handled the East Germany unification bailouts and relief.
Most importantly,
the EU would gain the moral authority to work with Greeks on politically
awkward reforms. It’s one thing to grudgingly tolerate technocrats who are
bleeding you dry in order to satisfy bankers—quite another to work with
development specialists who come to Greece bearing gifts.
As has been said the EU and the ECB could call it the Merkel
plan, so that Chancellor Angela Merkel might be remembered not as the jackbooted
German who destroyed Greece but as the wise European leader who tempered
austerity with sensible mercy.
The time is here for the IMF, World Bank and ECB to immediately
recognize and understand that Greece, like other poor countries or developing ones,
that have enormous unsustainable odious debts, has very little capacity to
repay such a debt.
Further, it is morally and economically appropriate for Greek to
refuse and question or recognize the legitimacy of this odious debt forced upon
the Greek people and their economy.
Greece its government and citizens must not be held in this
position of having to borrow more just to service debt, and no longer be
asked to service such a debt when it has little to no trade surpluses.
The one way to keep Greece and the
EU economically and financially together and for
Greece to get out from under its
debt is similar to that of how Germany got out of its debts after World War 2.
The current Greek repayable amount must be
reduced by 50% and stretched out over 35 years. Also, such a new agreement must
state that repayments on this reduced loan are due only when Greece has a trade
surplus and that repayments be limited to 5% of export earnings.
This would give the E U countries, the Euro
Zone central bank and all creditors a powerful incentive to import Greek goods
and thus greatly assisting Greece's new reconstruction.
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