- “I fear that the German government, including its social democratic faction, have gambled away in one night all the political capital that a better Germany had accumulated in half a century,” he told the Guardian. Previous German governments, he said, had displayed “greater political sensitivity and a post-national mentality”.
The simple version, as I understand it, is that since the start of the eurozone Germany has been that responsible roommate who always pays bills on time while greece parties and is a bit more concerned with their own needs than the needs of the group. That "partying" caught up to them and they want to be responsible now but the sheer volume of their debt means they'll be paying for their mistakes for years. Responsible Germany is the most on the hook for these problems, so when Greece proposed a new plan that would lessen their burden, Germany was the last holdout when everyone else agreed it was a good idea. Now it's a showdown between Greece and Germany.
Actually, Germany plays a slightly different role. Up until around 2008, things were going really well for everyone involved. As you may remember, some slight economic disturbances then happened on a rather global scale. Germany kept selling Greece its goods and when Greece had no money left, further loans were offered, provided Greece agreed to use that money to buy... German submarines. This was at a time when Greece was already deeply in trouble. Germany then arranged for further loans, which Greece had to use to pay off exisiting loans at private banks (which obviously had made huge profits as long as the party was still going.) This was not about helping Greece, it was time to socialize the losses of the big financial players. That much was obvious even back in 2012. As a matter of fact, by 2015 only 10% of all the bailout money had actually made it into Greek government coffers. Everything else went right back abroad to foreign private lenders. Shockingly, this did not lead to an economic upturn for the Greek. Even more shockingly, extreme austerity measures introduced right into the middle of a deep recession did not lead to 4-5% growth rates (more than any European nation in decades), as the models had assumed. Instead, strangely enough, all those lovely forced austerity measures only drove Greece further towards a point of no economic return. Meanwhile, the Greek population learned that cancer medication is kind of a luxury good, when you think about it. You might think that Merkel, who understood just fine that recession time is spending time, would not somehow forget about that whole concept a year later. But somehow it slipped her mind. Whoops.
"We need to spend billions to bail out the freakin' banks again because they again took a huge and utterly retarded but highly profitable gamble" didn't sound so good in 2010. So things were handled a bit more discretely. All said and done, the risk associated with Greek debt had been slightly shifted
I could go on, but as I said, my point is: Germany's role is not exactly what you may think it is.Back in 2010, nearly all government debt was owed to private entities such as banks. Today 78 per cent is owed to the public sector, primarily people in other Eurozone countries, but also throughout the world through the IMF’s loans.
What is this "partying" that Greece has been partaking in, and why should Greek citizens pay for it?
Greece joined the eurozone in 2001. In 2002 it seemed they cooked their books to make their country look more profitable on paper and to meet the requirements for entering the eurozone. In 2004 a new a government found the extent of the lies, but the greek olympics were coming up so they didn't say anything. After the olympics they didn't come out with their figures, but tried to fix everything behind the scenes. They might have been able to do it, but in 2008 the global financial crisis hit and Greece got slammed. Their taxation system effectively failed and shut down and their very good social benefit systems just started eating money. Greece needed money and since they were in the eurozone, if they didn't get it everyone else would suffer. They were bailed out and were trying to turn things around, but it's at this time that investigators of the loaners, who now had official access to the books, uncovered what the greek government had been hiding. Greece's credit rating is downgraded, the cost of borrowing goes up, and the loan conditions kill a lot of cushy jobs and push unemployment through the roof. Things snowball, Greece borrows more to pay for old debts, but at higher interest rates which just pushes them farther into debt. This spiral goes on for a while and the people get pissed. The books won't balance as people don't have enough money to pay the tax rates required to keep up with even the paired down social services and to pay back the loans. Now they need money again and the EU is getting sick of taking the government's word that this time things will be different. The EU, specifically Germany, is now saying "alright, we'll give you money but now you have to do things our way." These are harsh measures for greece and would be painful, but Germany has a track record of fiscal responsibility so it's probably got some merit.
That's a hell of a question. In the long term a win for Germany means the continuation of harsh austerity measures, high taxes, long term repayment, restructuring, of Greece. This ensures Germany gets all of their money back . A win for Greece is a little more complicated. The current conversation is whether Greece will accept or reject the austerity package from the eurozone. That's what that big Greek public vote was a week ago, vote yes and the measures are adopted, no they're rejected. But more so, the vote is really as to whether greece stays in the eurozone or not. If they reject the austerity measures then they are kind of off the hook in terms of debt (in a weird theoretical way that will play itself out practically at a later date) but they are also out of the eurozone. Greece, I think, is the only country in the euro zone that's not connect to the others by land and is in a pretty rough neighborhood. Without the protection of the EU, the reality of their rough neighbors could become quickly apparent. If they accept the austerity measures they are pretty much agreeing to a very well structured great depression. The measures attempt to spread out the pain, but there's a lot of pain to spread and the greek people will likely feel that pain for generations. In this way there is not really a way for Greece to win, just two versions of losing.