The European Union’s Unpleasant Greek Choices

Joseph StiglitzA few years ago, when Greece was still at the start of its slide into an economic depression, the Nobel prize-winning economist Joseph Stiglitz remembers discussing the crisis with Greek officials. What they wanted was a stimulus package to boost growth and create jobs, and Stiglitz, who had just produced an influential report for the United Nations on how to deal with the global financial crisis, agreed that this would be the best way forward. Instead, Greece’s foreign creditors imposed a strict program of austerity. The Greek economy has shrunk by about 25% since 2010. The cost-cutting was an enormous mistake, Stiglitz says, and it’s time for the creditors to admit it.

“They have criminal responsibility,” he says of the so-called troika of financial institutions that bailed out the Greek economy in 2010, namely the International Monetary Fund, the European Commission and the European Central Bank. “It’s a kind of criminal responsibility for causing a major recession,” Stiglitz tells TIME in a phone interview…

Over the weekend the prospect of Greece abandoning the euro drew closer than ever, as talks between the Greek government and its creditors broke down. Prime Minister Alexis Tsipras, who was elected in January on a promise to end austerity, announced on Saturday that he could not accept the troika’s “insulting” demands for more tax hikes and pension cuts, and he called a referendum for July 5 to let voters decide how the government should handle the negotiations going forward. If a majority of Greeks vote to reject the troika’s terms for continued assistance, Greece could be forced to default on its debt and pull out of the currency union.

Stiglitz sees two possible outcomes to that scenario — neither of them pleasant for the European Union. If the Greek economy recovers after abandoning the euro, it would “certainly increase the impetus for anti-euro politics,” encouraging other struggling economies to drop the common currency and go it alone. If the Greek economy collapses without the euro, “you have on the edge of Europe a failed state,” Stiglitz says. “That’s when the geopolitics become very ugly.”

—Simon Shuster
Joseph Stiglitz to Greece’s Creditors: Abandon Austerity Or Face Global Fallout

4 thoughts on “The European Union’s Unpleasant Greek Choices

    • It’s a good article. I disagree to some extent, however. I don’t think this is about technocrats doing what is best “in theory.” It is ideologues who are involved in social engineering. We’ve seen this again and again when countries decided to impose austerity by raising taxes on the rich. Greek did that and the Troika balked. These are some very evil people.

      I will also note that Germany is currently able to do economically to Europe what the Nazis failed to do militarily. I don’t think it is a coincidence. I think there really is something wrong with the German psyche.

      • Salutin’s humanistic sympathies are better than his analysis, but I always like seeing optimism and unabashed liberalism in someone so old; he hasn’t given up on us yet.

        I’d be surprised if Germans were any worse than anyone else. When it’s been possible for the country to exert brutal power over others, it has, and many citizens have supported this. Isn’t it always so? There’s no such thing as an “evil empire” because all empires are, by default, pretty nasty.

        Happy America day!

        • Absolutely. Just the same, different groups of people have different cultures. There are many things I like about German culture, but many things I don’t. All of the EU is aligned against the Greeks. It’s pathetic. But a lot of that is simply that Germany as the center of power, has so much leverage over the rest of them. But I’ll admit, just as I have a special fondness for France (which has a huge amount of blood on its hands), I have a special disdain for Germany. Of course, part of that is just because I’ve known a lot of Germans.

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