Greece needs debt restructuring

On January 30th, Paul Krugman wrote in his NYT column: "In the five years (!) that have passed since the euro crisis began, clear thinking has been in notably short supply. But that fuzziness must now end. Recent events in Greece pose a fundamental challenge for Europe: Can it get past the myths and the moralizing, and deal with reality in a way that respects the Continent’s core values? If not, the whole European project — the attempt to build peace and democracy through shared prosperity — will suffer a terrible, perhaps mortal blow."

Krugman discusses the myth that Athens has used the rescue package of EU and IMF loans for itself. "The truth, however, is," he says, "that the great bulk of the money lent to Greece has been used simply to pay interest and principal on debt. In fact, (...) to oversimplify things a bit, you can think of European policy as involving a bailout, not of Greece, but of creditor-country banks, with the Greek government simply acting as the middleman — and with the Greek public, which has seen a catastrophic fall in living standards, required to make further sacrifices so that it, too, can contribute funds to that bailout."

Another myth Krugman tackles is that Greece would fully repay its debt. "Now, the truth is," he says, "that nobody believes that Greece can fully repay. So why not recognize that reality and reduce the payments to a level that doesn’t impose endless suffering? Is the goal to make Greece an example for other borrowers? If so, how is that consistent with the values of what is supposed to be an association of sovereign, democratic nations?"

Debt reduction would be rational, argues Krugman. "Let Greece run smaller but still positive surpluses, which would relieve Greek suffering, and let the new government claim success, defusing the anti-democratic forces waiting in the wings. Meanwhile, the cost to creditor-nation taxpayers — who were never going to get the full value of the debt — would be minimal. Doing the right thing would, however, require that other Europeans, Germans in particular, abandon self-serving myths and stop substituting moralizing for analysis."

Krugman's hope has not been fulfilled these past days, when both Greek finance minister Yanis Varoufakis and prime minister Alexis Tsipras asked in European capitals for support to Greece's plan to restructure debt and end austerity. 

“The only thing we ask for is not to be put under pressure by means of an ultimatum. To give us time until the end of May or the beginning of summer to be able to put our suggestions for a solution on the table so we can talk about them with our partners,” said, Greek Finance Minister Yanis Varoufakis in an interview with German public broadcaster ARD - See more at: http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

“The only thing we ask for is not to be put under pressure by means of an ultimatum. To give us time until the end of May or the beginning of summer to be able to put our suggestions for a solution on the table so we can talk about them with our partners,” said, Greek Finance Minister Yanis Varoufakis in an interview with German public broadcaster ARD - See more at: http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

"The only thing we ask for," said Varoufakis in an interview with German public broadcaster ARD on February 4, 2015, "is to give us time until th end of May or the beginning of summer to be able to put our suggestions for a solution on the table so we can talk about them with our partners."

“The only thing we ask for is not to be put under pressure by means of an ultimatum. To give us time until the end of May or the beginning of summer to be able to put our suggestions for a solution on the table so we can talk about them with our partners,” said, Greek Finance Minister Yanis Varoufakis in an interview with German public broadcaster ARD - See more at: http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

“The only thing we ask for is not to be put under pressure by means of an ultimatum. To give us time until the end of May or the beginning of summer to be able to put our suggestions for a solution on the table so we can talk about them with our partners,” said, Greek Finance Minister Yanis Varoufakis in an interview with German public broadcaster ARD - See more at: http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf