Now that Greece’s citizens have overwhelmingly rejected the idea of continued financial austerity, the rest of Europe—particularly Germany—must decide whether to continue to hound the broke-ass Greeks to repay their debts. And Germany’s own moral superiority is far murkier than Germans might think.
With all of the political and economic machinations surrounding the Greek debt crisis, it is easy to lose sight of the basic situation, which is this: Greece’s leaders unwisely borrowed money that was freely loaned to them, and they blew it unwisely, and now they can’t pay it back. (More precisely, they can’t pay it back the way that creditors want without imposing a severe level of suffering on Greek citizens.) Wishing that Greece could pay it back, or harshly scolding Greece for being unwise with its spending habits, will not make the country any more able to pay the money back. The question that Europe’s bankers (and German leaders, who tend to provide most of Europe’s money via their strict German sense of propriety) now face is whether to keep pumping money into Greece in order to try to right the nation’s economy so that they might be able to, one day, repay some of their debt; or whether to just say “Fuck you, Greece,” and demand their money, and chase Greece away from a united Europe for good.
There is a moral element to all of this. Most people believe that if you borrow money, you should pay it back. And because most people believe this on a personal level, they believe it for entire nations as well. But nations do not operate like individuals. It’s counterproductive to throw a poor person in debtor’s prison, and even more counterproductive to push a nation to the point of war because it can’t pay off its creditors. Any moral discussion of Greece’s debt must contend with the question of how much average citizens—who will do the real suffering under austerity—are responsible for the economic mistakes of their leaders.
In an interview with the German paper Die Zeit (translated into English by Gavin Schalliol, though his translation has since been taken down for copyright reasons), Thomas Piketty tells Germany rather stringently that they are full of shit—after all, Germany spent many years rampaging through Europe and destroying neighboring countries and accumulated tons of debt during WWII, and they were never required to pay all of that debt back.
“After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround,” Piketty says. “We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece. Instead, both of our states employed [inflation, a special tax on private wealth, and debt relief].”
Now that Germany’s economy is strong and the debt shoe is on the other, Greecier, foot, though, Germany would like to see Greece exercise the sort of “fiscal discipline” and austerity that could prove ruinous for the Greek people. Piketty does not deny that the Greek government was crooked, but he asks Germans to look at the big picture: “Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance. We need to remember this.” He calls for the same sort of European conference on debt that took place after WWII—one that benefited broke-ass Germany then, and which would ask the Germans to now, in essence, pay that historic debt forward to broke-ass Greece, so that the indebted nation of the moment can move forward without being ruined.
All of this is a wonderful primer on the point at which debt stops being a math issue, and starts becoming a moral issue. No people on earth want to be made to do penance for a debt that they don’t feel responsible for incurring. When debt reaches the point that paying back would severely damage the economy of the nation being asked to pay it back—or when the payback might extend longer than a single generation, with the debt burden of past fools being shifted on present strivers—it is probably time to get more flexible about payback terms. Otherwise, people tend to start breaking things.
Remember that those who extend too much easy credit are just as foolish as those who accept it.