Comments 66

The Endgame in Greece

Jun 16, 2015 Jeffrey D. Sachs

After months of wrangling, the showdown between Greece and its European creditors has come down to a standoff over pensions and taxes. The Greek government is right to have drawn the line, while the EU could pay dearly for its petulance.

PARIS – After months of wrangling, the showdown between Greece and its European creditors has come down to a standoff over pensions and taxes. Greece is refusing to acquiesce to demands by its creditors that it cut payments to the elderly and raise the value-added tax on their medicine and electricity.

Europe’s demands – ostensibly aimed at ensuring that Greece can service its foreign debt – are petulant, naive, and fundamentally self-destructive. In rejecting them, the Greeks are not playing games; they are trying to stay alive.

Whatever one might say about Greece’s past economic policies, its uncompetitive economy, its decision to join the eurozone, or the errors that European banks made when they provided its government with excessive credit, the country’s economic plight is stark. Unemployment stands at 25%. Youth unemployment is at 50%.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.

Featured

The UK’s Multilateral Trade Future

Dec 6, 2017 Giancarlo Corsetti & Meredith A. Crowley
Understanding the North Korea Threat

Dec 6, 2017 Joseph S. Nye
The Globalization of Our Discontent

Dec 5, 2017 Joseph E. Stiglitz
Whither the Multilateral Trading System?

Dec 6, 2017 Daniel Gros
Trump’s Willing Accomplices

Dec 5, 2017 Ian Buruma

Jeffrey D. Sachs

Writing for PS since 1995
274 Commentaries

Jeffrey D. Sachs, Professor of Sustainable Development and Professor of Health Policy and Management at Columbia University, is Director of Columbia’s Center for Sustainable Development and of the UN Sustainable Development Solutions Network. His books include The End of Poverty, Common Wealth, The Age of Sustainable Development, and, most recently, Building the New American Economy.

0 Comments on this paragraph, 65 in all 65 Comments on this article

charles cecil Jun 30, 2015

Correct! Perhaps it would have been useful if, somewhere along the line, German and French lenders (in particular) had speculated on the probability of Greece being able to repay the loans they were making. One might also ask, as a mere intellectual exercise, where the hundreds of billions of dollars that were borrowed actually went, and where are they now?
Enrique Woll Battistini Jun 29, 2015

It is evident that if by Tuesday Greece fails to arrange with its EU creditors to refinance, refund in the US Treasury meaning, or freeze its massive debt and pay a nominal and modest interest rate, without capital repayments in the mid term at least, all the forecast calamities will hit its people, its economy, and its government with a marked and mounting risk of civil disruption in a matter of days, with a likely domino effect on the EU. The most dire consequences of default could be possibly staved off if the Greek government immediately prints paper money, or creates electronic money, and disburses it tax free to all Greeks through their bank accounts to keep demand alive and the economy running. Clearly, without any foreign credit Greece will only be able to grow from within, at the pace that its own savings, and renewed FDI would eventually permit, when it reappears, once the Greeks have shown that their economy will not stall, and that those new equity investments, tied to a new Greek determination to reform and sacrifice for increased productivity, would allow. If the current debt were frozen, and nothing more were done beyond the suggested stimulus, it might take twenty years of hardship to pay it back, and the prospects of this happening are extremely unlikely as history indeed shows. Perhaps the only realistic solution to avoid this and future defaults lies in the EU as a whole taking greater risks and invest massively in Greece with a long term view, bolstered by EU sponsored pro-immigration policy and deep policy reforms, to avail Greece of an increased and better qualified workforce for the 21st century, and a real chance to produce, trade and prosper.
- Enrique Woll Battistini Jul 1, 2015
  
  It is evident that if by Tuesday Greece fails to arrange with its EU creditors to refinance, refund in the US Treasury meaning, or freeze its massive debt and pay a nominal and modest interest rate, without capital repayments in the mid term at least, all the forecast calamities will hit its people, its economy, and its government with a marked and mounting risk of civil disruption in a matter of days, with a likely domino effect on the EU. The most dire consequences of default could be possibly staved off if the Greek government immediately prints paper money, or creates electronic money, and disburses it tax free to all Greeks through their bank accounts to keep demand alive and the economy running. Clearly, without any foreign credit Greece will only be able to grow from within, at the pace that its own savings, and renewed FDI would eventually permit, when it reappears, once the Greeks have shown that their economy will not stall, and that those new equity investments, tied to a new Greek determination to reform and sacrifice for increased productivity, would allow. If the current debt were frozen, and nothing more were done beyond the suggested stimulus, it might take twenty years of hardship to pay it back, and the prospects of this happening are extremely unlikely as history indeed shows. Perhaps the only realistic solution to avoid this and future defaults lies in the EU as a whole taking greater risks and invest massively in Greece with a long term view, bolstered by EU sponsored pro-immigration policy and deep policy reforms, to avail Greece of an increased and better qualified workforce for the 21st century, and a real chance to produce, trade and prosper.
  
  More detail:
  
  June 27, 2014
  
  Staving off the impending effects of unemployment through increased consumption
  
  © Enrique Woll Battistini 2014
  
  The Trillion Dollar Platinum Coin financial instrument promoted by Hellen Brown and others in order for the Federal Reserve to fund the Federal Government directly, in my opinion, would certainly not save the economy. The bottom line flaw in such thinking is that the availing of limitless credit or cash to Government, whether Federal or State, by the Federal Reserve, would place the economy -with all it entails- in the hands of Government to an unacceptable degree, and not nearly enough in the hands of the Private Sector, effectively impeding the role of the Federal Government as the main legitimate arbiter and protector of the entirety of society, and ending the key role of the Federal Reserve vis-à-vis the money supply and inflation. The nefarious effects of this paradigmatic shift would not be limited to the United States, but would be felt throughout the globe.
  
  Indeed, given that money is power, the Federal Reserve would quickly loose its independence to the Federal Government, be absorbed, and disappear forever, and given that the Federal Government would be synonymous with money in this scenario, it would soon prove, if it has not done so convincingly enough already, the truth and wisdom of Lord Acton’s words, when he warned that "Power tends to corrupt, and absolute power corrupts absolutely." Moreover, the mere lack of the need to tax people or private enterprise to fund the Federal Government, and the consequent disappearance of the need for new issues of U.S. Government Bonds, together with the instant and worldwide distrust of the U.S. Dollar that would ensue, would simultaneously cause its terminal devaluation and create immense pressure by countries such as China for immediate redemption of the massive U.S. Government Bond debt that they hold, in kind, if not in gold, at historical values. In addition, of course, the currently conducted open market operations by the Federal Reserve for control of the money supply and inflation, and refunding operations by the U.S. Treasury to meet its bond redemption obligations, would immediately cease forever for lack of a market. Control of inflation would depend on the Federal Government alone, and its only tool would be the careful control of additions to the existing money supply. The immediate consequence of this horrific situation would prove to be a catastrophic dilemma, easy to envision, no matter what choice were made, as no middle ground imaginable would satisfy the parties involved.
  
  Moreover, the accompanying notion that States should create State Banks that could pledge State assets such as bridges and roads, and maritime ports and airports, in lieu of Trillion Dollar Platinum Coins of their own, in order to obtain and back their own Federal Reserve loans, is magic thinking of the worst and most dangerous kind, as the Federal Reserve is currently a private institution and as such could end up owning massive and crucial State assets, outright, and under the Federal Trillion Dollar Platinum Coin doomsday scenario described above, as stated, it would be quickly folded into the Government, which, in time, would become the owner of the States, quite literally. Of course, again, this would be a doomsday scenario.
  
  Nevertheless, and in any and every case, one immediate reason why placing the economy exceedingly in the hands of Government would be unacceptable is that, contrary to the teachings of Neo-Classical Economics, and Modern Monetary Theory, it does matter how money is spent, and whether it goes to produce shoes or guns always make a difference, but in the case of increases in the money supply, especially the large ones that would likely result from application of the Trillion Dollar Platinum Coin, how it is spent greatly matters, especially in the first go-around of its endless circulation throughout the economy. The question would be then, who should be doing the first spending and the primary spending? The Government or The People? And lastly, obviously, Central Banks should continue to exist, and to exercise their traditional control over the money supply and inflation, until a superior type of institution can take their place.
  
  The foregoing would seemingly apply around the globe, but, on the other hand, if unconstrained, if nothing transcendentally efficacious is done, the impending effects of the growing unemployment in the Euro Zone –which threatens the world– would be widespread bankruptcy and, very soon after that, general social disorder, national disarticulation, hunger, and for many millions of people in the Fourth World, it would mean, quite literally, starvation. However, staving off these looming effects carries the obvious need to increase employment, and production, in all currently affected countries, and this in turn requires increased and sustained demand, and consumption, acting in perpetual circular virtuous motion. This much is evident, but empty pockets simply cannot result in increased demand. Thus, clearly, the way to end this conundrum is to find the fastest and surest way to jump-start this life-sustaining cycle, and, not surprisingly, the spark required is simply the consumption of all currently available goods and services, period. And in my view, the only way to achieve this crucial change in attitude, on a world-wide scale, in the immediate horizon, is economic stimulus through an impulse-increase in the disposable income of people, and the assurance of continuity into the mid term horizon; that is, through the implementation of periodic economic –cash– stimuli for as long as necessary as dictated by the natural employment and inflation targets of each affected country.
  
  This remedy could take the form of Limited-Life Personal Economic Stimulus Consumption Cards (ESC) issued to consumers across the board on a monthly basis by Governments, and financed by incurring new debt, or by Central Banks, through prescribed increases in the money supply, and implemented in every case through commercial banks in all affected countries. Simply stated, the solution to unacceptable or to widespread unemployment would be the issuance of 30-Day Government Debit Cards. Everyone in possession of this debit card would spend the –cash– purchasing power it granted them on whatever consumer goods and services they needed the most within its 30-day lifespan, given that after its expiration date any unspent amount would be irrevocably lost. In addition, these cards would not be redeemable for cash, and given that they would be personal, and issued to individuals, they could not be pooled, used as collateral, traded, or used in any way other than for personal consumption. And finally, their purchasing power would be subject to automatic renewal at a prescribed value, equal for all, for administrative simplicity, adjusted for attainment of inflation-unemployment equilibrium over time, on the first day of each month for as long as the program lasted.
  
  The first effect of this program would be to reduce inventories and create demand for workers of all levels, rapidly reducing unemployment to its natural levels in these countries. Inflation would happen, as always, if unemployment were reduced below its natural level, and vice-versa, and, as always, prices would soon settle, as must be, at a higher level. However, resulting inflation, if any, could be compensated for the infirm, the poor, the unemployed, and the retired, through this very same program, funded, at the end of the day, by the increased production it seeks and would surely find. The second major effect of this program in all affected countries would be to increase personal incomes and savings, and to increase tax revenues, reduce fiscal deficits and national debts.
  
  ***
  
  http://www.truth-out.org/news/......
  
  First published on March 19, 2013
  
  ***
  
  May 20, 2014
  
  The XXI Century Tax Reform
  
  © Enrique Woll Battistini 2011
  
  Taxation is of obvious world importance in this century of growing confrontations between the rich and the poor, in which general social peace will be attained only if we can fast establish a privately led Private Public global articulated system for sustainable development: That is, a system for comprehensive, fair, and environment friendly development. It is also fitting to note that the development and dissemination of an effective proposal for such a system would necessarily require and include a proposal for a complementary major global tax reform through which the public sector could yet make its greatest contributions to development in the XXI century.
  
  Taxes should not be instruments of envy, of punishment, or of abrupt economic or social leveling of the peoples. Most persons, no doubt, would agree with this. And taxes should also not be used by the State primarily as instruments of social manipulation, or of indirect management or control of economic activities, not even those of national interest, because economic health should result, primarily, from essentially unhindered private sector activities. This approach is not direct enough and is subject to the usual corrupting effects of special interest lobbies. Rather, the economy should be free to run its course under a legal framework that restricts it from generating significant negative externalities by directly prohibiting and limiting activities that would give rise to them, by responsibly licensing activities that require regulation, and by ensuring that all such costs be included in pricing.
  
  The State can and should preserve the health of the economy, at the macro level, essentially through the Central Bank, and the Treasury. These institutions must act with independence, and coherence, within the general and specific regulatory frameworks applicable the activities of the public and private sectors. The former, by controlling inflation through adjustments to the discount rate, and through purchase and sale operations of Treasury bonds in the open market, and the latter, by complementing, by exception, the funding of the comprehensive State budget by responsibly incurring and retiring debt, by issuing and calling its bonds as may be appropriate.
  
  Thus, taxes should not only be the source of State funding, in order that it may fulfill its constitutional ends, but must also be its source par excellence, almost exclusive. In addition, the constitutional ends of the State and its consequent activities must constantly aim at the direct search for tangible citizen welfare through the provision of services within its exclusive competence, in the areas of Environment Food and Health Security, Energy Education and Comprehensive Development Security, Social and Internal Security, and National Defense Security, drastically limiting the supplementation of State tax revenues through indebtedness, or complementary activities, or entrepreneurial ventures, particularly those in which it would compete with the private sector, something with which the great majorities would also agree.
  
  Moreover, when State interventions in private sector activities are socially necessary, accepted, and extant, they must not be conducted by the State as entrepreneur, as stated, save in rare exceptions, and must always be done directly, through the comprehensive State budget, targeting the pertinent strategic sectors and actors, without neglecting the most impoverished social strata, and without resorting to special tax regimes.
  
  Now therefore, having linked the tax issue with the constitutional ends of the State, in its natural context, which is the comprehensive State budget, the heart of the State fiscal system, and a fundamental instrument of governance, it should be noted that the State fiscal system in the XXI century must gather certain essential characteristics for the State to be able to comply in the most effective and efficient manner with its central objective, the direct search for tangible citizen welfare:
  
  1. Conceptual simplicity
  
  2. Administrative simplicity
  
  3. Fiscal divorce
  
  4. Absolute transparency
  
  The indicated conceptual and administrative simplicity requirements would demand the existence of a single tax, or sole tax, which would be a sole consumption tax, or SCT, applicable exclusively at the consumer product level without exception, and would have a flat fixed rate, say of less than 20%. That is, the SCT would be applicable to the goods and services produced wholly or partially in the country, for direct personal consumption, acquired by individuals, or by legal entities, regardless of the purposes or uses intended or given, including as inputs, or for resale, or for export. This tax would be paid by individuals and legal entities upon each purchase, in a manner similar to that of the current payment method of the general sales tax, GST, segregating its amount, in the invoice, from the total price of goods and services concerned, with the individuals or legal entities selling, that would collect it, regardless of their nature or size, incurring the obligation of immediate payment to the Tax Authority, as allowed by the information and communication technologies in existence at the time.
  
  The conceptual and administrative simplicity required would also demand, as already stated, the absence of special tax regimes, that is, the absence of tax credits of any kind, or deductions, or exemptions, or reductions, or fragmentations, or waivers, or any distinction in the tax rules applicable to different legal entities or different individuals, or between these categories. Thus, having only the SCT, there would be no taxes on income, or property, or inheritance, for example, and it would per force have to be collected and administered at the central level by the Tax Authority and the Treasury, respectively.
  
  The required fiscal divorce within the State would consist of and require the total and irreversible separation and independence of the category of revenues from the category of expenditures in the comprehensive State budget, that is, of SCT collections from the category of uses or applications of funds to public expense and to public investment, without exception, beyond the correspondence that they must keep to maintain a reasonable fiscal balance and the national debt from Treasury bond issues at a minimum level, and under control. Therefore, the comprehensive State budget must consider and include a National Prosperity Reserve Fund (NPRF) which would allow for the growth of public spending and investment in line with the historical growth of the national GDP in times of Economic Recession, and even of Economic Depression, that is, that would enable the State to perform compensatory counter-cyclical economic stimuli whenever convenient.
  
  Furthermore, in the absence of the referred traditional instruments of manipulation through taxes, in order for the State to be able to comply fully with its primary purpose, which would be the direct search for the tangible citizen welfare, as pointed out, there would per force be cases of socially necessary and accepted State interventions in private sector activities, that it would not perform as an entrepreneur, but rather would be made directly, targeting the pertinent strategic sectors and actors, without forgetting the most impoverished population strata, by means of nonrefundable contributions, or of loans, or of complementary capital stock, by the Treasury according to the referred comprehensive budget. These interventions by the State in the activities of the private sector, through the Treasury, would be subject to private and public oversight, to satisfy the requirement of absolute transparency, by publishing the details of each case in the corresponding Web page, as part of the fiscal accountability of the nation.
  
  This new instrument of economic stimulus, and of social justice, would eliminate the deceptions and errors to which the more complex elements of the current tax system are subject, by individuals and legal entities, as well as the armies of private sector lawyers constantly confronted with the armies of public sector lawyers that produce a zero-sum economic result. In addition, this instrument would simplify the State function, allowing its reorganization, reform, and consequent reduction and public savings, and would eliminate tens of thousands of lawsuits of all types related to tax issues and the consequent futile efforts of and at the Judiciary to make or undo justice, resulting in savings and increased productivity in the private sector.
  
  A fiscal system of this kind, under equal internal and external economic environments, in comparison with the current, traditional system, would not only facilitate but would encourage the establishment of a socially acceptable minimum standard of living for the most impoverished, by aiming to achieve, over time, for the poorest population stratum that would together generate 1% of the national GDP, a monotonically increasing average per capita consumption relative to the national per capita GDP, that, in a context of national per capita GDP growth, especially, would constitute an objective, and realistic, economic and social growth and inclusion index, according to the economic possibilities of the nation.
  
  Thus, a worthy and realistic national goal, in the mid to long term, would be to attain a consumption level for the poorest population stratum together generating 1% of the national GDP of not less than, say, 10% of the consumption level of the strata comprised by the wealthiest individuals together generating a reference level of 50% of the national GDP, with the concomitant stimulus to savings and investment. Over the remainder of this century, this reference level would be slowly and judiciously decreased for greater equality and inclusion of the poor.
  
  Given time, this fiscal system would, at the micro level, achieve this goal and the wider national objective of economic and social inclusion, by allowing the financing of all manner of regular and emergency social support programs, including a program of supplementary liquid income, and their monitoring in a scheme of comprehensive zero-based State budgeting by results, with the necessary transparency to effectively combat corruption in the public and private sectors. Crucially, a fiscal system of this type would enable the citizen determination, in a democratic and direct manner, of the percentage share of the various categories of expense and investment in the comprehensive State budgets, at least for the aforementioned broad categories of Environment Food and Health Security, Energy Education and Comprehensive Development Security, Social and Internal Security, and National Defense Security.
  
  ***
  
  First published on October 4, 2011
- Enrique Woll Battistini Jul 1, 2015
  
  https://disqus.com/by/enriquewoll/
- Enrique Woll Battistini Jul 1, 2015
  
  http://semanaeconomica.com/article/economia/internacional/164067-grecia-los-escenarios-que-enfrenta-en-el-referendum/?utm_source=boletin&utm_medium=matutino&utm_campaign=2015-07-01&hq_e=el&hq_m=834321&hq_l=4&hq_v=a36fe74e3d
Bienes Raices Jun 25, 2015

“La crisis se produce cuando lo viejo no acaba de morir y cuando lo nuevo no acaba de nacer.”
―Bertolt Brecht
atul baride Jun 23, 2015

The exit of Greece is eminent but it is not ' end ' of EURO Zone Crises, Its Just the beginning of Weak and Small European Nations getting Sucked into Pauperism and Exit in Shame...
Ian Buckley Jun 23, 2015

Greece.doc
The End Game in Greece
Given the stark evidence provided it is altogether clear that the Greek government has only one way to clear its debts, as it proposes by swapping existing debts with new debts locked into low interest rates and long maturities, linked to Greece’s economic rate of growth. Short of debt cancellation, no other positive outcome appears possible. Thus, as Jeffrey Sachs summed up the situation, “The Greek government is right to have drawn the line. It has a responsibility to its citizens. The real choice, after all, lies not with Greece, but with Europe.” Yet it seems that Germany and other ‘Troica’ creditors are not as yet satisfied with Greece’s sincere compromise proposal.

And although some, especially in Germany, seem complacent about a Greek exit from the Eurozone, a more realistic view is that such an agreement would be good not only for Greece and Europe as a whole, but for all world. For as Jeffrey Sachs notes, “Conditions in Greece today are reminiscent of those in Germany in 1933.” No, not another Hitler waiting his chance, but significantly “… there is something that the EU should fear: destitution within its borders and the pernicious consequences for the continent’s politics and society.”

For as we may recall, in both human and material terms, all European populations initially involved in World War One had had catastrophic outcomes. Tens of millions killed or dying of exposure, disease, famine; tens of millions wounded, lives blighted for the long term. According to Paul Kennedy even one country, Russia, accounted for near half the 60 million total, that doubtless helping to trigger its 1917 revolution. As well, of course, all these European states were dangerously ‘at sea’, deep in debt. And given that Europe’s populations were suffering great material deprivation, there arose very real concerns in upper echelon quarters that their cries for economic justice if not met might trigger popular revolt for ‘socialism’ - or some other form of egalitarianism.
And yet, at the same time, while creditor countries were looking to the debtors’ repayments, debtor countries like Britain and France, which had already ‘won’ most of the Middle East’s oil territories as League Mandates, were (in hope) expecting Germany, (the allegedly sole ‘guilty party’ which alone had ‘caused the war’ but lost) to pay its total cost, - hence Keynes’ disgust at such dishonest unrealistic policy. Yet, not only could Germany not ‘pay for the war’ (its ‘competing’ exports to Britain prohibited) once international trade was hit by the Great Depression and Hitler the hoped-for savior came to power in Germany, - then Britain’s emphasis shifted completely to the support of Germany’s rearmament (e.g., Anglo-German Naval Treaty of 1935), as documented by Winston Churchill in The Gathering Storm. That was in the hope of protecting the West from the influence of Russian Communism, Hitler’s Mein Kampf being well known for advocating his country’s eastwards expansion into Russia. Yet, as Churchill well understood, Hitler’s ambitions were unlimited. Not only Russian soil and oil, nor just all of Europe, but complete world domination. And it was only very late in the day that Britain’s Conservatives finally realized this, but by then it was too late to prevent WWII. So, no wonder Churchill’s Preface judgement to President Roosevelt on that war as "the unnecessary war", he going on to say “There never was a war more easy to stop than that which has just wrecked what was left of the world from the previous struggle."
That was clear enough, but on consideration it was not just WWII that was ‘unnecessary’ but certainly WWI and all in the modern era since Adam Smith critiqued their twisted ‘economic’ foundations in Wealth of Nations. For there he made altogether clear the distinction between mutually-agreed and beneficial fair trade and the mercantile version which had extended from earlier feudal practice hinging on brute force. Indeed, a practice totally at odds with ‘common practice’ between everyday people and businesses making agreed-value exchanges between each other, that entirely peaceful mutually-satisfying exchange which resulted in confidence and friendship between the parties.

Yet, when it came to trade at the highest levels, Europe’s self-appointed ‘exclusive business’ folk persisted in rejecting Smith’s wise counsel in favour of ‘winner takes all’ ‘trade’ contests in which the final arbiter of ‘success’ was (in knightly fashion) the contest in arms. Hence the continuation of counter-productive wars between Europe’s states and the utter absurdity of WWI. And then, since the penny had still not dropped, WWII. Nor did it drop even then. However, Europe did at least succeed in developing common features designed to increase and maintain its coherence, something vital to solving the crisis over Greek indebtedness. So, as alluded to by Jeffrey Sachs, it is altogether crucial that Europe not allow this relatively minor issue to throw it and the rest of the world into a fall-back into the worst forms of combative mercantilistic chaos, for that would represent a truly dire ‘race for the end’.

Ian Buckley,
ANU Emeritus Faculty Building,
Australian National University ACT 0200
Australia
ian.buckley@anu.edu.au
http://www.anu.edu.au/emeritus/members/pages/ian_buckley/IKBhome.html
simon noble Jun 22, 2015

Nice one sided piece.

What if political reality is such that the EZ countries cannot write off the debt and at the same time lend more? Writing off the debt may be possible, but giving Greece more cash after that? rather than pontificate why not make a practical suggestion?
Leo Kolivakis Jun 22, 2015

My latest on managing a Greek default featuring insights from Theodore Economou:

http://pensionpulse.blogspot.ca/2015/06/managing-greek-default.html

Best regards,

Leo Kolivakis

Publisher of Pension Pulse blog.
Oduori Haggai Jun 22, 2015

Africa can provide jobs for Europeans. We need a campaign to convince African leaders and citizens to open up the service and manufacturing industry. Just picture this - Europeans have many highly trained workers, with a strong work ethic and experts in different technology for example manufacture of drugs, solar panels, hospital equipment, composite materials for the motor vehicle industry, farming equipment etc all of which have a ready local market. If we rely on our African experts we shall take another 100 years to arrive at solutions that serve 900 million people. But if we bring on board Europeans and the Japanese we can revolutionize our status in less than 20 years. Lets start a conversation around creating global citizenship to allow free movement of labour between Africa, Europe and Japan!
Diego Orlandi Jun 22, 2015

debt economy is the new colonialism
- atul baride Jun 23, 2015
  
  Well Said
Michael Remler Jun 22, 2015

Written in the usual willful arrogance of economists. Before the economics comes the politics in the best sense of the word. Greece wants to be able to change the meaning of words at will. Greece is being humiliated by Greece by acting with petulant dishonor to their own words. To accept that is to destroy the EU and a fair part of civilization with it.
Naoise McDonagh Jun 21, 2015

Excellent political and moral reading of the crisis we now face in Europe. As Sachs points out European politicians, and we should note the IMF also, are willing to let the European project disentigrate because the Syriza government has stood up to their demands to further immiserate pensioners and the sick. If Greece leaves the Eurozone it will signal both the end of solidarity and the end of the Eurodollar. And IT IS WISHFUL THINKING of the highest order by Draghi and Wolfgang Schauble, Germany's finance minister, if they think fallout can be contained - just as it was wishful thinking that an appeased Hitler could be contained. This standoff is ultimately about power, and the ability of Europe's kleptocracy to wield it against minnows on the periphery. Ireland has already experienced this process in bailing out its banks to pay French and German-owed debts. Now Greece, Europe's first democracy, is also the first to make a stand against econo-tyranny waged by bankers and elite politicians against European citizens. The Greeks should be proud of themselves for it.
Rod Ruger Jun 21, 2015

So Greek citizens should not suffer for the venal missteps of its elected government. Then why should citizens of other EU nations suffer for the missteps of the Greek government?

At least the Greek people lived high and easy (and many did not pay taxes) for many years. Other EU citizens should pay for that profligate, irrational lifestyle?

Regardless, which EU nation has the budget surplus that will permit continued "lending" to Greece? Every one of them enjoys a troubling national debt. Socialism at work.
Michael Letellier Jun 21, 2015

Datelined Paris? Mr Sachs fails to understand the rigor of austerity programmes here in Europe where taxpayers everywhere are really smarting. The Greeks crept into Europe, should Mr Sachs refer back to his history. The question is - 'Why should I contribute to pay a retired policeman in Greece, 1,600€ a month when I, as a young man and with a job hard fought for, earn at best, without taxes, 950€ and I'm trying to raise a family?' Sachs is a typical know it all from New York.
Brent Beach Jun 21, 2015

Mr Sachs should keep his inflamatory remarks to the subject at hand. Rather, he included this juicy item: "Hank Paulson to let Lehman Brothers fail ... we are still digging out from Paulson’s monumental mistake. "
This suggests that the great recession was in fact caused by the Lehman Brothers failure, or could have been lessened had that failure not occurred.
This is far from a consensus position.
Many on the left feel that had more of the too bif to fail banks been allowed to fail the problems would be less severe today. The 800 billion in direct bailouts in the US and the trillions in indirect bailouts (QE) could have been better used to revive main street. Abandoning wall street would have been an immediate 6.5% hit to GDP, but would have affected only the 0.1% who depend on it. Support of real banks that lend to people and businesses would have revived the real economy quickly and the vampire squid would have been gone forever.
Too bad Paulsen did not have the nerve to let the rest fail as well.
Marek Krol Jun 21, 2015

Very sappy story, but not factually correct - Greece today is not comparable much to Germany in 1930s, in particular I can't envision Greece as industrial machine feeding German-like Wehrmacht invading the rest of Europe from Greece, can you?

Exit of Greece from euro might actually be beneficial overall to both Greece and Europe - in particular, instead of endangering entire eurozone, Greece would endanger only itself in the future. As things stand, this whole eurozone crediting unsustainable Greek spending and then demanding it being paid off is a very unhealthy political setup, as we witnessed - German taxpayers are angry at German politicians for subsidizing Greece too much, Greek citizens are angry at European politicians for demanding to pay Greece's debts off and at their own politicians for supposedly giving in to supposedly ruthless and supposedly unjust demands of Euro politicians, and I bet all politicians are angry for being expected to do what is in essence an impossible job of subsidizing Greeks enough, but not angering their home voters too much either.

Such politics collapses before economy does. If only people (say German taxpayers and Greek citizens) behaved different, eurozone would work... That's wishful thinking, because people will not behave different. "At each stage of the crisis, they [politicians[ have done only what they believed their national politics would bear – no more" - and just what else did Mr. Sachs expect really?

Other issues - just why would exit of Greece from eurozone be trouble to other countries that fundamentally are financially and economically sustainable? Perhaps in the alternative scenario they would actually benefit from Greece's exit as this would have eurozone as a whole bear less financial risk and instability, not more (Greece's risk would no more bear on them too)?

And if they're not financially sound and economically sustainable, just what Mr. Sachs thinks would sustain them - more and bigger bailouts than Greek ones when the current ones are unsustainable anyway? In that case, the whole eurozone is destined for collapse.
Peter Schaeffer Jun 21, 2015

Greece is still living vastly beyond its means and borrowing massively from the rest of Europe to pay its bills. Sachs would have us believe that the only problem is that Greece isn't being allowed to borrow even more. That's crazy.

Pensions in Greece are 16% of GDP. That's absurd. Greeks (still) retire before the age of 60. By contrast, Germany is raising its retirement age from 67 to 69.

Greece amounts to a spendthrift that blown through a dozen credit card by taking them to the limit. "Austerity" is defined as not allowing Greece a dozen new credit cards.

Sachs talks about the "maturity" of Greece democracy. Sure, Greeks all agree that Europe should pay their bills. My family is very mature as well. They all agree that Sachs should pay our bill.s
Stilianos Mavroulis Jun 21, 2015

I hate to say this; even people with the highest qualifications have no clue about the Greek situation and attempt to offer advice that does more harm than good.
Greece is in a state of dissolution because of its system of governing. It cannot afford it. 8% of the population works for the public sector. The government even pays for the salaries of the syndicalists who are the main reason why the industry in Greece has but disappeared. Hey, big wig, no industry no jobs. And industry will not come to Greece because of its leftist labor laws. The government controls even the employer’s laying off or firing policies. And as if it wasn’t enough, the employer must pay six months’ severance pay to those whom he lays off or fire for any reason. So the main employer in Greece is the government. One in nine people work for the government! And to put the cream on the cake, it spends about 11-15 billion a year to sustain illegal immigration.
Let’s talk sense, neither the previous government had a plan nor this one has to tame the syndicates, fix labor law and make it business friendly, stop illegal immigration, reduce drastically the public sector, and cut corporate taxes to below 10% in order to invite investment. Instead they want to preserve the status quo and fund the government through tax increases and borrowing.
These are the true facts and I am tired with big wigs’ lengthy articles about how to fix Greece and make wild associations with European world wars. I am Greek, and love my country. I am 71 and have no pension, my life is not rosy. I am as close to live under the nearest bridge as it can be, but if you want to help us, help us fix our government. Even if the Europeans give in to everything our leftist government wants, that will do nothing for us if we don’t fix the way we govern ourselves.
- Diego Orlandi Jun 22, 2015
  
  Thank you for the very interesting insight. Do you not think though, that internal corruption is sometimes a scapegoat to all our problems (I say this to you as an Italian)? Why did this collapse coincide with the financial crash? What moral implications do the international banks have, who speculated on internal corruption and illusionary scenarios to put the country in debt? and why do these banks (many of which got bailed out by their mother countries with more money than we can imagine) share the same street addresses as the credit rating agencies that evaluate the health of our financial systems, and thus our destiny as a sovereign nation? is this all a coincidence?
- Kenneth Pao Jun 22, 2015
  
  Mr Mavroulis,
  
  Thank you for sharing your view as a Greek. I emphasize with you of your hardships as a US retiree also age 71. I'm sure that you are aware that only the Greeks can change the Greek government. I agree that the author of this article, a professor at Columbia University and special advisor to the UN Secretary General NO LESS, really has no idea what he is talking about !
  
  At this point, the best path forward is a Greek bankruptcy and self elected exit of the Euro and the Greek citizens need to do some very painful and very deep soul searching whether they can continue the status quo or to implement the necessary corrections as you outlined.
- Ian Maitland Jun 21, 2015
  
  Stilianos:
  
  It is a pity you did not live in the time of Diogenes. He would have found his honest man.
Ian Maitland Jun 21, 2015

Jeffrey Sachs's outburst is petulant, naive and fundamentally self-destructive. It is the reaction of a mandarin who has been too long in the business of giving away other people's money.

Sachs doesn't mention that Greece was turning the corner before Syriza came to power on the platform of rolling back the reforms Greece had promised. The Greek people hired adolescents to do men's jobs. As President Obama said, elections have consequences.

Let's get real. As the Economist pointed out, Greece's debt service is just .3% of GDP a year.

Also Greece has been offered help with its payments. But it has rejected that help because it refuses the Troika's conditions. Greece's fate is in its own hands.

The same issue of the Economist reported recent research showing that debt relief works -- but only when it comes with conditions. It is precisely this conditionality that Syriza rejects.

Sachs' hysteria does not help matters. How dare he glibly state that Greece is resisting cuts in payments to the elderly without laying the full facts before us. Greek "elderly" in their fifities have been grandfathered out of the nation's pension reforms. Those pensions could feed the hungry. Greece's insolvency is of its own choosing. SEE http://www.economist.com/blogs/freeexchange/2015/06/greek-pensions

Sachs tells us that Greece's GDP has shrunk by 25% since the beginning of the crisis in 2009. But there's all the difference in the world between an economy shrinking and a bubble bursting.

And Sachs can spare us his "I'm a greater humanitarian than thou" shtick. There is nothing humanitarian about shoveling more money at a corrupt government of a corrupt economy. Where will the money come from next time?

Sachs refers to possible contagion as a result of Grexit. But he doesn't mention the "Economic Consequences of Mr. Sachs" -- the greater risk of contagion from a bailout on Syriza's terms. How will the EU say no to populists in Spain, Portugal and Italy, if it says yes to Syriza?

Will Sachs explain why it is that the Greek government has a responsibility to its citizens, but Germany's government does not have a responsibility to its citizens to be a faithful steward of their taxes?

Sachs owes us an answer: Where and when, if ever, would Sachs draw the line? Because if Sachs gets his way, Greece will soon be back again with its begging cup.

The issue is not restructuring Greece's debt (for the umpteenth time). The issue is restructuring Greece's corrupt polity and economy.

Here is my practical suggestion: Syriza should let the Greek people vote on the EU's bailout terms.
Jaime Manzano Jun 21, 2015

Sachs is a political activist rather than an economist. His positions eschew the reality a market. His sensibilities favoring the redistribution of wealth are counter to his objective of sustainable development based on savings and investments, not entitlements to consumption. He may be honest to his values, but has, like most ideologist, a disturbing amount of intellectual conceit.
Michael Booth Jun 21, 2015

The desire to finger the US as the all-purpose villain is apparently irresistible. I agree, and uncharacteristically with Sachs, with this essay in all its particulars. But related to Sachs aside "mainly the US" I have to point out it was the French who were demanding a pound of German flesh in 1919, and Wilson who was trying to talk them down on war reparations. This while Wilson was trying to create momentum for League of Nations, you may recall. Sachs is either historically or ideologically ignorant of the dynamics of the times.
William Cash Jun 21, 2015

Many people just say what they think is true but frequently isn't. Greek pensions are not exorbitant. Here is what's happening:

some reforms are under way: those 130 funds have shrunk to 13, the standard retirement age for men has been lifted to 67, and, above all, since 2010 public and private sector pensions have been severely pruned, on a scale ranging from a 15%-cut for the very lowest (under €500 a month) to as much as 44% for highest (more than €3,000).

Greek pensions are now, on the whole, far from exorbitant: social security ministry figures show the average main pension is €713 a month, and the average top-up pension – typically funded by an industry retirement scheme – €169 per month. Some 60% of pensioners get less than €800 gross a month, and 45% live on less than the monthly poverty limit of €665.
- Ian Maitland Jun 21, 2015
  
  William:
  
  You are only telling half the pension story. Here is the rest (courtesy of the Economist http://www.economist.com/blogs/freeexchange/2015/06/greek-pensions):
  
  "Yet there was a crucial hole in the reforms: they largely sheltered older workers, so that they could retire on broadly the same terms as before. As an example, Platon Tinios, a pensions expert at Piraeus University, highlights the reform limiting the list of arduous occupations. This no longer included new hairdressers from 2012 but all those with more than ten years’ experience retained their previous right to retire five years early. The new accrual rates applied to years worked from 2011; previous years worked still benefited from the earlier more generous formula (although the resulting benefits are then subjected to the cuts applied to pensions in payment). According to Professor Tinios, 'the vast majority of those planning to retire this decade are grandfathered' (shielded) from the reforms."
  
  "The result has been a wave of early retirements as people take advantage of the old rules at a time of high unemployment. That has pushed up spending while contributions fell away leaving the pension system more and more reliant on huge transfers from the taxpayer, now worth 9% of GDP. Pension spending jumped to an unaffordable 17.5% of GDP in 2012 ...."
Nils Torvalds Jun 21, 2015

I read a lot of wrongheaded advice regarding Russia in the 1990's. Their advice led to a catastrophe - and to Putin. I'm not really sure they have the right advice regarding Greece either.
Miranda Xafa Jun 21, 2015

The Greek pension system is unsustainable; it offers pension not just "to the elderly" but also to quite a few youngsters and to people who never contributed to the system, or did not contribute enough for the pension they earn. The Greek government is asking poorer countries, including Slovakia, whose average pension is half of the Greek, to fund an insolvent system so that the Greek government can avoid reform. There is no sympathy for the Greek demands anywhere in Europe. The government is risking Grexit without having such a mandate. This is "mature democracy"?
Manu Oquendo Jun 21, 2015

The Euro, without political union under a truly federal and democratic European Gvt, was --and remains-- a grave mistake.

A mistake which, very definitely, only benefits the hegemonic Power and the Industrial Powerhouse of Europe at everybody else's expense. Undeniable.
In fact you will remember that, at the time, the Euro and acceptance of ECB instead of the Bundesbank, were the conditions imposed by some of the Occupation Forces to allow the German Reunification.

Have we forgotten?
What is wrong with correcting a mistake?
Why do we have to persist in the error?
Jose Oyola Jun 21, 2015

This case highlights a fundamental weakness in the EU mechanism to solve fiscal and debt crises. When all members of a debt restructuring committee are finance ministers of creditor nations, solutions are skewed to cutting pensions and wages in the debtor country, and matters of national security, social stability, history and european culture are cast aside. If all of these factors were considered, the solution to the Greek crisis would be to convert the Greek debt held by the European Central Bank into a 50-year bullet loan, like the US did with British loans during the World War. Also, a new regime of prudential sovereign loans, based on credit risks, will be established for all banks that will require capital to be set aside based on credit riskiness. This requirement will change the behavior of sovereign lenders and borrowers going forward.
Andrew Purdy Jun 21, 2015

It would be interesting if Greece leaves NATO defects completely to the Russian camp, after Grexit and debt repudiation.

It will also be informative to see how far the EU/ECB/IMF/USA go in order to punish the Greeks afterward. These things will determine the fate of the EU and the geopolitical contest between the Russians and the US.
john Fahy Jun 21, 2015

It's an interesting situation.
The countries that are now demanding Greece pay up are the country's that have created this mess, by pouring money into a small country whose only assets are grapes, olives, tourism and shipping.
The only major corporation is the Orthodox Church?
So where's the money coming from to service this debt?
Laurence COPELAND Jun 21, 2015

OMG! If "Greece's democracy has proved impressively mature", heaven help us if we ever see an immature one! So in the author's view, maturity is voting overwhelmingly for another country's taxpayers to give you even bigger handouts. No wonder he is such a pillar of the international aid community.
Curt Doolittle Jun 21, 2015

Sacks is not a moral man.

The source of Greek poverty is Greek behavior: the stacking of rents (pensions) as political bribery. Miscasting this circumstance allows sachs to make a false moral equivalency.

The europeans want this fraudulent behavior stopped. As any moral people wish it stopped.

There are reasons why some groups hold territory, create institutions, monuments and prosperity. And the Germans pay those costs every day while the Greeks do not.

There is no quick route to prosperity other than free riding and parasitism.

It requires the suppression of free riding and parasitism including intertemporal debt transfer and pervasive corruption and low trust that stifles invention, production distribution and trade.

So no.
- Curtis Carpenter Jun 21, 2015
  
  Don't you think that the Greek's creditors were fully aware of "Greek behavior" when they allowed that country to run up its unsustainable debt?
  
  "Banker's behavior" has, it seems to me, fallen well short of the mark here too. And that needs to be taken into account by those who wish to start passing judgement on "moral" grounds, doesn't it?
Henry Rech Jun 21, 2015

What is disturbing is the admission of the Irish Minister for Finance that the members of the Eurogroup were not able to see the respective submissions of the institutions and the Greek government before Thursday's meeting because of individual state political protocols. How can there be any sane or effective discussion of the situation without this information. It shows a clear structural weakness in the process of dealing with and resolving critical situations. No wonder the Eurogroup processes have staggered on and that there has been no resolution.
M M Jun 20, 2015

Greece survived centuries (of natural and man-made disasters) and will survive centuries more. Regrettably, humanity never learns…...
Isa Frihets Jun 20, 2015

Maybe the day Greek public officials and Greek sovereign bodies learn to follow treaties, do as agreed with their EU partners (not as it best pleases them including all obnoxious creativity and perversion) things change.
Maybe Jeffrey D. Sachs could lecture them on "Rule of law" to start with. All else is drama.
Our Greek brothers and sisters have a beautiful country, wonderful food, fav history .... and then they have a terrible and fraudulent 'elite' that has been bankrupting them half of the time since the 19th century.
Time to get a decent regime for Greece, with normal (i.e. qualified, experienced, with a track record of merit and a clean criminal record) people on board.
All else is drama.
- Curtis Carpenter Jun 20, 2015
  
  For some Greeks, all else is drama. For others, it's having no job and missing meals. And whether Greece leaves the EU or not, defaults or not, the fallout is likely to leave those who are experiencing the "drama" pretty much unscathed -- and positioned to rebuild the same Greek system on its old foundations.
Peter Spyers-Duran Jun 19, 2015

Clearly it is in the Greek people's interest that Greece exit the EU, devalue, and start over.
Manuel G Samuel Jun 19, 2015

Not that Mr. Sachs needs a defense lawyer here, but I believe he is simply making his case for preserving the EU as it is, even if it implies money transfers from the most affluent regions to the poorest. Very much as it happens in the US - public money often flows from richest States to the others. Again, very much like in Germany, public funds from Baden-Württemberg and Bavaria making up for other less economically successful länder. The bottom line is: do the 504 million Europeans want to live in an Union or not? Do the 334 million EZ citizens want to preserve the singly currency or not? Is money the only thing that really matters at the end of the day? If so, then the whole concept of the EU is no longer valid. Even if Greece debt situation is sorted out, there will always be other European regions with economic problems that incur in unsustainable public debt due to misgovernance and corruption, due to outlandish banking practices, due to a common currency that favors capital intensive regions, due to geoeconomics, etc. etc. And, oh..then there are geopolitical issues that go beyond the fact that tax-payers from rich regions do not want to pay for economic crisis in other regions (which in their own private spheres may be legitimate). History, notably from the 20th Century, is full of examples.
- steve from virginia Jun 21, 2015
  
  Right now there are transfers between richer north EU countries and Greece: the ELA has shifted €40 billions to Greek depositors already, Germany is on the hook b/c it is the only country in the EU with money.
  
  One way or the other the North Europeans are going to pay for Greece. The easy way is for the EU to keep lending freely to Greece (Bagehot) and not make waves. The hard way is Greek debt repudiation with interest rate/forex derivatives' market spiraling out of control. Any losses (times leverage) will be borne by the North; Germany will exit the euro to save itself: the problem of credit overextension is not just a Greek problem!
  
  Geography is destiny: Greece is on the historical smugglers' route from the 'Orient' (Middle East/Central Asia) to central Europe. Will the Germans, Dutch, Finns and Poles like the waves of militants, smugglers, drugs, arms and other contraband entering the Continent by way of a broken Greece w/ a black market economy?
  
  Keep in mind also that euros will circulate in Greece even if the county exits the currency officially. Will Germans like a black market euro, a medium of (criminal) exchange?
  
  As for aggregate costs: it isn't the Greek pensions, it is the Greek automobiles ... a foreign drain (Bagehot, again). What is underway in Greece and elsewhere is 'Conservation By Other Means'.
- Vicky Lavendel Jun 19, 2015
  
  Dear Manuel G Samuel, you are making the same mistake like many US-Americans by comparing transfers inside the eurozone with transfers inside the US. However you oversee that the eurozone is no federal state and that it wont become a real state soon either (because the European population actually does not want it and has already voted doen such attempts ten years ago referendums in France and the netherlands). For that reason you should rather compare eurozone transfers with transfers from the US to Mexiko. Would US citizens be willing huge amounts of money to Mexiko without having any significant influence on what happens with that money there? Surely not and no country in the world would accept such a thing because such permanent transfers outside a common state much more remind to classical reparation payments.
Panos ilikrinis Jun 18, 2015

Great article as always.
Would like to comment on the PSI ( private sector involvement),
In my opinion despite all the noise it achieved very little.
By the time it took place foreign banks had offloaded their holdings to the ECB which in turn did not accept any haircut.
The remaining was held either by Greek banks or pension funds. When the haircut took place the banks had to be recapitalized and that was achieved by funds from the EFSF. Those funds increased again the debt load ( with lower interest rates ). So it was a case of robbing Peter to pay Paul. The design was for the warrants to get exercised and pay off the EFSF debt , but that never happened.
In General my opinion is that the solution lies in the middle ground. The Greek debt must be reduced and the Greeks need to reform , ideally some incentive based system where debt is reduced every time reforms are met.
I think the creditors have more to lose by not offering better terms to Greece.A) they will lose the money they have lent straight away
B) they will be putting at risk the EURO project c) they will be risking geopolitical stability at a very fragile time in the region
Greece on the other hand has tried to comply with the IMF programs and has seen its economy collapse and now feels desperate. Desperate negotiators are dangerous because (rightly or wrongly) the feel they have nothing to lose.
George Mike-Ray Jun 18, 2015

My dear insightful Professor, you fail to realize the true geopolitics of what is happening with the Greece bail out drama. Most poorly run countries now have the mentality that financial agreements does not mean anything and can be broken at whim.

Greece signed an agreement, and their political leaders have failed woefully to stick to it. Being grown up comes with responsibilities like I tell my son on a daily basis.

Why should other EURO members with sensible economic policies keep carrying this failing country. Better to stand firm and teach one a good lesson than to have every member believe financial agreements can be broken easily.

Contrary to what you said in your article, tax collection policy is the hindrance to reaching an agreement. Greeks are notoriously lazy at paying taxes, and the massive corruption is not helping the country.

The political class must grow some giant size "BALLS" and institute a tax policy that's followed by everyone.

To encourage employment, private businesses should not be treated like a ward of the state with crazy regulations.

Just like what will happen in America someday, the free ride of borrowing from Peter to pay Paul is over.
hari naidu Jun 18, 2015

Sadly this is same guy who was consultant to Russia - after fall of Soviet Union - to privatize state owned industries, etc. And what a mess he made...before he was forced to leave. I'll not go into his professional undoing, as a professed expert on privatization.
Grexit has been on the cards ever since Galbraith did the long interview with YV - idealistic & devoid of political reality - on Greece basket-case macro scenario.

I also recall Prof Papandreou Sr (Ex-Berkely & Minnesota) who est. PASOK & committed himself to *milk the EU cow* with EU structural funds -1980s - while Gonzales (Spain) was using same funds to develop Murcia (next to Valencia) as the fruit basket of EU. Papandreou used EU structural funds to
finance his PASOK political establishment! And, then, Greece cheated EU with advise of Wall Street Bank to qualify for entry into Euro. Eurostat didn't have the legal authority at the time to control statistics of sovereign members!

It does today, after Greece took Commission & Council for a conceited political ride...Tsipras is just another case today.

It's consultants like Sachs & Stieglitz who have intellectually misled Greece establishment & its post-Fascist political follies of misgovernance....

The end game is decided by a petulant Tsipras - ex-communist - to default IMF payment 30 June!
wolf bialon Jun 18, 2015

Not a single country in the EU (Eurozone anyways not) agrees with Greece. The only accomplishment of this greek government is to have completely any trust and sympathy 100%. From day one, this government did nothing but insult, blackmail and extort. And how exactly do you, Mr. Sachs, explain that to 500 Mio Europeans? Pathetic to say the least ...
Since 1981 Greece received 180 bn Euros form the EU, 240bn in bailout (and do not even try to come with that myth it was for the banks - Hans-Werner Sinn made these numbers transparent), the equivalent of 115bn Euros, 100bn in an unprecedented haircut (initiated and pushed through by Merkel by the way), 120bn to date in ELA funds (liquidity for Greek banks provided by the ECB) and all we here from Greece is one insult after another. Have you seen what the Greek parliament said today about the debts? This country cannot be helped, if their only plan is to be financed by other country's taxpayers while at the same time refusing to make major and necessary changes in their own country. Greece though they had Europe by their balls, and that is how they behaved from day 1! I am sorry, I can only hope we do not allow such parasite members any longer in the Eurozone or EU!
- wolf bialon Jun 18, 2015
  
  "the equivalent of 115bn Euros" should be: the equivalent of 115 Marshal Plans!!!
- wolf bialon Jun 18, 2015
  
  Even those who received and welcomed Tsipras like a rockstar after he won the elections have turned away from him. Even the Left Party in Germany votes with 52% against further bailout!
wolf bialon Jun 18, 2015

Pathetic to say the least! Not at all addressing the unbelievable deficits and shortcomings of this country. This cannot be justified to other country's taxpayer any longer. GRE(U)XIT! Greece needs to leave the Eurozone as well as the EU!
Manuel G Samuel Jun 18, 2015

An interesting perspective from Jeffrey Sachs which is inspiring from an historical and geopolitical standpoints. Keynes's dixits are always interesting and helpful, notably as valuable contributions to understand economic conditions in Europe between WW1 and WW2.
It is interesting to follow how the recent flurry of published articles by renown opinion-makers, such as Sachs, Stiglitz, Munchau, Wolf and many others, are shaping public opinion and influencing major decision makers in Germany, France, EU Commission, IMF, EZB and the like. It is also interesting to follow the latest Greek polls concerning the fear of Grexit. In the meantime, EU periphery bonds shoot higher. Investors are simply cutting their holdings in bonds of peripheral EZ countries on concerns of broader fallout from a potential Greek debt default. Together with the swelling crisis of boat people crossing the Med Sea to Europe, the EU is now under serious strain. Grexit will be no doubt an experiment as much as the decision to let go Lehman Brothers was in itself a liberal take with unaccounted effects. Anyway Grexit and LB are different cases. What is relevant this time around is that no one can assure without doubt that, from an international viewpoint, there will be no major negative economical, political and geopolitical side effects from Grexit. To some extent - and despite the assurances from parts of the public opinion of creditor countries and pundits from creditor entities (that, contrary to 2010, Grexit is now fully digestible) - there is some sense of "twilight zone" surrounding Grexit. And this is unsettling, especially when the southern flank of the Mediterranean and the bordering regions are in urgent need of stability. Will geopolitical interests take over from economic/financial interests? We will have an answer soon.
j. von Hettlingen Jun 17, 2015

Jeffrey Sachs is an idealist. Of course it is easy for him to criticise Greece's creditors for holding their ground. He sees their demands as "petulant, naive, and fundamentally self-destructive, when they insist on economic reforms in Greece in exchange for the release of a new tranche - €7.2bn - in bailout funds. Unfortunately this would "cut payments to the elderly and raise the value-added tax on their medicine and electricity".
Sachs insults the Germans, when he says the "conditions in Greece today are reminiscent of those in Germany in 1933". Ordinary Germans were starving and there were severe food shortages, following the economic downturn after World War One - the US stopped trade with Germany and it ran out of raw materials for manufacturing. Until the financial crisis in 2008, most ordinary Greeks had been able to live quite comfortably and throw food away without any qualms, because they had social largesse to fall back on.
The only difference Sachs sees, is that the "European Union need not fear the rise of a Greek Hitler", thanks to "Greece’s democracy has proved impressively mature throughout the crisis". He can't possibly deny that the Weimar Republic had guaranteed its citizens civil rights and freedoms, even if not in full. Then he deplores that our "continent remains split along tribal lines. Germans, Finns, Slovaks, and Dutch – among others", and that we have "no time for the suffering of Greeks". Reading between the lines, he seems to imply that we have little compassion for our Southern neighbours.
It's most unfortunate that many Greeks have to bear the brunt of their governments' mistakes in the past. But it's also true that many EU-leaders focus more on realpolitik than the interests of the Union - solidarity and unity. That Greece’s "creditors seem ready to abandon their solemn pledges on the irrevocability of the euro" is that they have come to terms with reality. Not "in order to insist on collecting some crumbs from the country’s pensioners"! How cynical can Jeffrey Sachs be? It's fatalistic to believe that, should the creditors "press their demands, forcing Greece to exit, the world will never again trust the euro’s longevity".
Whether "the Greek government is right to have drawn the line", is up to the Greek people to judge. Not only Greece "has a responsibility to its citizens", so do the creditors to theirs. It's not correct to say: "The real choice, after all, lies not with Greece, but with Europe". It's the other way round!
jan olaf sipkes Jun 17, 2015

Once again surprised at USA's distinguished vieuws. This time Brussels is right. A Grexit is the worst option for Greece. Reality time. A change of Greek government and acceptance of "playing by EU rules" is the only reasonable alternative. Since we know the history of Greece's "accession" the question has always been : does Greece belong in the EU from an Economic standpoint ?
Henry Rech Jun 17, 2015

There will be no winners west of the Dnieper.
M M Jun 17, 2015

US Treasury Secretary Jacob Lew has, a short while ago, given the most explicit warning ever made by a serious politician on the Greek crisis, whilst the EU/EZ leaders are still bickering. I shall rest my case.
Rogers Varner Jun 17, 2015

"It's not my fault." Mr. Sachs puts the blame for Greece's economic woes on all but Greece. This economy is the end-game for years of socialist policies and anti-free market government. The only reason for Germany to cave in to Greece's absurd demands is to keep the value of the Euro lower. Greece should be cut loose to face the full blow of their own foolish decisions. If Greece stays in the union, it only prolongs their festering economy. Sometimes an addict has to hit bottom before he can save himself.
- John Brian Shannon Jun 17, 2015
  
  Hi Rogers Varner,
  
  Blaming Greece's economic woes on socialism, is akin to blaming the huge deficit and debt of the U.S. on the mafia. (!) There is no connection between the two. Get it?
  
  Some of the most economically successful and socially successful nations have employed socialism to get where they are today -- and that, with precious little in the way of land area or resources.
  
  Let's take Norway for example which is by anyone's standard, a socialist nation (although they do have a 'right wing' political party and a 'left wing' party.
  
  Norway has $1 trillion dollars in the bank (in the form of a pension surplus) of which they only spend the interest they make on that money, on social programmes, etc. since 1990.
  
  That's what you call fiscal responsibility -- of a kind lacking in many countries since 1970.
  
  Norway has tuition-free university for anyone (Norwegian, or not) who can afford to pay their own living expenses. Making it a very highly educated nation, which corporations love (highly educated, highly skilled workforce)
  
  Norway has free universal healthcare, ranked 7th in the world. It would rank much higher than that, but many small northern communities are hard to reach and many of the Sami (Inuit) people are nomadic people who follow the reindeer migration route, so chasing them down in an ambulance to ensure they get good healthcare isn't an option.
  
  Norway has an astonishingly low crime rate. The whole country averages less than 1 murder per year, and almost all serious crimes are committed by visitors to Norway, and not Norwegians.
  
  Taxes are high, but you get a lot. Thousands of oil company and other executives move to Norway to start a family and raise their children -- even though oil and gas extraction is taxed at 78%.
  
  Every year, the oil and gas companies have the option to 'get out of the deal' and the Norwegian oil company (Statoil) will buy them out. But they never take that deal. I wonder why?
  
  Norway's unemployment rate hovers around 3% most years, but has been as low as 2.2% in recent years.
  
  Per capita income in Norway is ranked 2nd in the world by the CIA World Factbook and others, and PPP is 2nd or 3rd depending if you use the Factbook numbers or the OECD numbers.
  
  Norways' public debt is low at 33% of GDP and they run balanced budgets every year.
  
  The Norwegian economy continues to grow and diversify at a good pace. It's GINI numbers and ease of doing business score extremely well.
  
  Norway is usually ranked 2nd or 3rd in productivity in all of Europe.
  
  Norway scores in 2nd place on the Happiness Index and on the SPI (index) and it has a thriving tourism industry -- even though the entire country is covered in a thick blanket of snow for 6 months of every year.
  
  Norway has twice hosted the winter Olympics and is the home of the Nobel Peace Prize Committee.
  
  It's cities are picturesque, safe, thriving centres of highly educated people, living fulfilling lives and making copious amounts of money while doing it.
  
  Other socialist countries score similarly, but don't have Norway's recent (since 1990) oil and gas wealth. But still manage to score very well in all the above categories that I've named. Sweden, Denmark, Finland, Switzerland, France, Germany, even Australia and New Zealand are most often in 'leftist' government -- and all of those economies are thriving and their people live in safety and comfort. All of them score very well on the Happiness Index, the SPI, productivity, etc. and have low unemployment and low crime -- especially compared to historically 'right' wing nations.
  
  You should really visit Norway or other Scandinavian nations, or other typically 'leftist' nations... you'd be surprised.
  
  Anyways, back to Greece. Bad management can come in the form of a right wing government or a left wing government. Greece has had both since the 1970's when its economic problems began.
  
  Best regards, JBS
  
  https://en.wikipedia.org/wiki/Economy_of_Norway
  https://en.wikipedia.org/wiki/Economy_of_Sweden
  https://en.wikipedia.org/wiki/Economy_of_Denmark
  https://en.wikipedia.org/wiki/Economy_of_Australia
  
  "Norway today sits on top of a $1-trillion Cdn pension fund established in 1990 to invest the returns of oil and gas. The capital has been invested in over 9,000 companies worldwide, including over 200 in Canada. It is now the largest sovereign wealth fund in the world." -- CBC News, Susan Ormiston reporting
  
  http://www.cbc.ca/news/business/norway-s-sovereign-wealth-holds-lessons-for-canada-1.3002803
Paul Daley Jun 17, 2015

Good article. The citations from Keynes are perfect.
Alisdair Hamilton-Wilkes Jun 17, 2015

Why should Greece have not been let into the Euro? Poor tax collection, bad financial controls, lack of private sector competitiveness, corruption.

In the last five years it has barely got to grips with any of these problems and that is why its exit from the EZ is inevitable. Greece has barely made any interest payments in the last few years, only recently have external payments fallen due the issue has been that the public sector bleeds cash.

I remind Prof. Sachs of his comments in 2010:
https://www.youtube.com/watch?v=3oZtPK6hqLU
(the 6th minute is especially amusing today).

The root cause here is the EU’s basic ineptitude at addressing any kind of problem, something George Soros described here https://www.project-syndicate.org/commentary/ukraine-eu-last-chance-by-george-soros-2015-03.

The EU and the Euro Group machinery has over extended itself and all it can do is the bare minimum to patch things up. If Greece stays in the Euro it will not be the only country to suffer death by a thousand cuts. Another slowing of the global economy will lead the periphery back into recession.

What we need is not just an end-game in Greece, which I suspect could yet drag on a lot longer than is apparent, but an end game towards a whole EU/EZ restructuring.
Gerin T. Jun 17, 2015

A typical uninformed US view.
The creditor's reluctance to write down the face value of the debt has very little to do with the fact that they hope to get their money back and a lot to do with not giving their only leverage out of hand. This leverage is needed (and has been used) to force Greece to restructure its administration..not so much for austerity (only to the point of a structural balance and then maybe a little extra because they refuse to finance ongoing deficits). The point is Greece is refusing to do things like modernize its tax collection or land registration..the EU has even provided computers, but the Greek government refuses to put in internet access for the Tax Admin employees to actually use them...
The EU was looking forward to working with Syriza as an outside and clean up vested interests and modernise the Greek state and in return restructure debt little by little in the future as an incentive. However, the trust that Syriza actually can or wants to implement serious reform (not austerity) is completely lost..In every instance they have shown that they just want to swap one group of vested interests for a new group of insiders. As long as that is the case, Europe is not willing to provide any financing.
Arne Tvedt Jun 17, 2015

It's not so much about taxing medicine - which the EU does not insist on - nor cutting payments to the elderly. It's about raising taxes and balancing its budget. The share of taxes as a %-age of GDP is lower in Greece than most EU countries, Tax evasion and all sorts of exemptions are endemic and all Greek governments have done little or nothing to change this. The EU can transfer funds and fill the gap for a while - and they've done so extensively, but such a policy is not sustainable and it hasn't helped Greece's economy to become more competitive, quite to the contrary it has helped the country to maintain a bloated public sector and maintain habits which are typical of third world countries. The solution, if there is one, is thus to cut transfers from the EU (or the IWF) and force Greece to attack its problems, even if that course of action will be painful for some time and all parties involved.
Bastiaan van de loo Jun 17, 2015

In NL the explicit (though absurd) promise has been made by politicians that all money "given" to the Greek shall be returned to the Dutch tax-payers. They are not hiding behind rhetoric, they are trying to live up to their promise to the electorate

http://prosyn.org/EGnYiZ2;

Log in/Register

The Endgame in Greece

To continue reading, please log in or enter your email address.

Featured

The UK’s Multilateral Trade Future

Understanding the North Korea Threat

The Globalization of Our Discontent

Whither the Multilateral Trading System?

Trump’s Willing Accomplices

New Comment

Email this piece to a friend

Contact us

The Endgame in Greece

To continue reading, please log in or enter your email address.

Featured

The Year Ahead 2018

The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.