NEW YORK – Sovereign-debt crises such as the one in Greece can be resolved only through bold steps by both debtor and creditor. The debtor needs a fresh start through a debt write-off; the creditor must find a way to provide one without rewarding bad behavior. For a deal to be struck, both sides must have their needs addressed. Thus, serious reforms and deep debt relief need to go hand in hand. It is for this reason that Greece and Germany, its largest creditor, need a new modus vivendi in order to resume negotiations.
To begin with, the Greek government must be clear about the need for urgent economic reforms. The country’s economy has not just collapsed; it is structurally moribund. The roots of Greece’s problems stretch far deeper than the austerity of recent years.
In 2013, for example, resident inventors in Germany filed some 917 patent applications for every million inhabitants. Resident inventors in Greece, by contrast, filed just 69 patent applications for every million.
If Greece wants the prosperity associated with a technologically advanced, twenty-first-century economy, it will have to earn it, by producing innovative products that are competitive on world markets, just as Germany does. Doing so is likely to be a generational challenge.