General Discussion
In reply to the discussion: Joseph Stiglitz to Greece’s Creditors: Abandon Austerity Or Face Global Fallout [View all]Babel_17
(5,400 posts)It's extremely hard for a leadership in Greece to form around a platform of necessary changes.
Austerity has failed but it did let the world know, and the Greek people know, that the leadership of Greece recognized that their past policies were not sustainable. Austerity as it was done was a poor choice. But it was arguably better than pretending the checks from overseas were going to forever prop up their failed model. Austerity has done real damage. While we can only imagine the effect of Greece losing in a showdown with its creditors, had it chosen to do nothing, it's not hard to envision utter chaos as all elements of their financial sector crumbled once losing their support
There were better choices, but the obstacles to putting together better packages were enormous. I think Greece missed an opportunity, earlier on, by not targeting the large numbers of middle class people who scoffed at the idea of paying their share of taxes. I think if Greece had shown earlier on that they recognized what was so blatantly wrong with their economy, and were actively and very publicly taking serious steps to correct them, then Greece would have been in a better position today in so far as having a trusting relationship with foreign lenders.
Foreign lenders, for their part, are much less connected to the irrationality of political demands and should have gotten a handle on this much sooner.
Greece needs to have their economy structured around growth. A large package of loans, interest reduction, and long term repayment restructuring, could be the catalyst for that. In exchange Greece needs to come up with a solid plan that won't repeat the well known mistakes of the past. Such a plan needs to recognize their dire straits, and it needs public approval.
The loans, and this last chance restructuring, should be conducted as seriously and realistically as used to be the case during SALT negotiations, and other similarly serious matters. The standards that both sides are held to should be that high.
Like with SALT, good faith goes a long way. For example, in exchange for some limited funding, and lower interest rates, Greece could devote some of that cash to hiring enforcers of the tax code, and actually collecting money from the worst offenders. To paraphrase what has been said here and elsewhere, foreign governments can't have their workers thinking their tax dollars are going to pay Greek workers more than they are getting. 99% of the time that might be an unfair characterization. But the Greek government did help create it, and now their actions have to continue its undoing.