Observer
June 19, 2011
'Poverty is the biggest brutality," read the vast banner outside the Greek parliament last Wednesday. The country was paralysed by strikes and street protests against the further round of austerity demanded by the IMF and EU in return for a second bailout package, a deficit reduction programme twice as large as the tough measures already in place. The price of the biggest-ever IMF intervention includes the sacking of a fifth of Greece's public sector workforce, swingeing tax increases and the biggest, fastest privatisation programme, relative to national output, ever mounted.
More than that, Greece will commit itself to repay at least ¤100bn of debt over three years, around 40% of its current GDP. The vengeful allies after the First World War tried initially to demand Germany pay reparations on that scale, atoning for millions of dead in the trenches, before more than halving their demands. Greece's creditors would fairly reply that there is a vital difference. Greece's debts are because of Greece's own choices, living wildly and corruptly beyond its means. None the less, can any country do what the EU and IMF are now asking of Greece?
The markets and credit agencies don't think so, marking Greek debt down to worse than junk status. But Germany has had a different proposal. Why not shrink the burden on Greece? The banks and big financial institutions who lent Greece money on such an absurd scale should also share the pain by accepting write-downs on their loans.
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