I was not planning to write another blog entry about Greece, but sometimes you’re forced by circumstances beyond your control. “What is you gonna do?” we say in such a case in New Jersey. Last Sunday Jeroen Dijsselbloem, Chairman of the group of Finance Ministers of eurozone countries, published a letter, in Dutch, defending the way the countries he represents have dealt with the Greek debt crisis. Unfortunately I can only address some of the lowlights, the first of which is an acknowledgement that Greece should never have been in the eurozone, because it never met the entry criteria. Apparently this is all Greece’s fault, since according to Dijsselbloem in 2000 it bamboozled the euro countries into believing that it only had a budget deficit of 3% of GDP, the admission standard, while in 2009 it turned out that the real deficit was 15.2%. It is almost amusing how Dijsselbloem completely absolves the euro countries for not having done their own homework on Greece, a fact that at least suggests that there were ulterior motives to expand the zone, and that the entry criteria were a lot more flexible than the eurozone now wants us to believe.
Upon entering the eurozone, again according to Dijsselbloem, Greece embarked on a program of abusing cheap credit to boost its prosperity without in any way strengthening its economy. As a result, debt accumulated. From 2005-2009 public spending increased from 45% to 59% of GDP, and between 2004 and 2010 government debt doubled. Over the same period household spending increased by 40%, mostly on credit. Again, it is astounding how Dijsselbloem fails to address the eurozone policies (or lack thereof) as well as the source of the credit that allowed Greece to go on this wild spending spree. It’s like the pimp, who has supplied the hooker, filing a complaint against her patron for sexual harassment, and it gets worse. The bubble started bursting in 2008, like in so many other countries, as a result of the world financial crisis, and since then the Greek economy has shrunk by 25%. Without any arguments Dijsselbloem simply denies that the austerity imposed on Greece during the post-crisis years has anything to do with this shrinking, and states that without European support the Greek economy would have collapsed even faster.
On the nature of that support Dijsselbloem’s letter is outright misleading. He fails to mention how initially European banks were very eager to lend money to Greece to make a buck, and fast forwards to 2012, when his group decided to extend the life span of loans from eurozone countries to 32 years in average and to lower the interest rate to 1.5%, because otherwise Greece would have defaulted. According to Dijsselbloem Greece should not have any problems paying off these ‘new’ loans with interest, which puts him on a collision course with the IMF that just released a report showing that without debt relief Greece has no chance of ever paying its debt.
Not surprisingly, the words ‘debt relief’ don’t appear in Dijsselbloem’s letter, which only strengthens the impression that Greece has to be made an example of what happens in case of bad behavior, even if the eurozone countries bear at least half of the responsibility for a potential disaster.
Finally, there are many minor issues in the letter regarding spending cuts and taxation that appear to contradict the information that is currently publicly available, and I fail to see how a self serving, paternalistic and narcissistic document like this contributes anything to a solution.