Published On: Mon, Jan 26th, 2015

Opinion: Solidarity with Greece makes economic sense

 

Greeks voted to press the reset button for their country. For both economic and historical reasons, it’s now time for Germany to reset its economic policy toward Greece and the southern eurozone, says DW’s Jasper Sky.

  Opinion: Solidarity with Greece makes economic senseSyriza Unterstützer Feier 25.01.2015 Athen Transparent Troika

Syriza, the leftist party led by the charismatic 40-year-old Alexis Tsipras, will form Greece’s new government. Europe is now waiting with a mix of anxiety and anticipation to see what happens next – above all, how Germany, Europe’s leading creditor nation, will react to the election of a populist leadership in Europe’s most indebted nation.

For reasons of both economics and history and for the sake of the survival of the European project, I hope that Germany’s leaders will react to the choice made by Greece’s democratic electorate with respect, solidarity and accommodation.

Tsipras has declared that Syriza will end the disastrous austerity program imposed on Greece by the International Monetary Fund (IMF), European Central Bank (ECB), and European Commission.

DW’s Jasper Sky

The troika also demanded that Greece undertake a wide range of administrative and economic policy reforms, aimed at improving the business climate and at reducing widespread cronyism, tax evasion and corruption.

Breaking with the past

Syriza agrees with many of those reforms. Syriza’s election was above all a decisive rejection by Greeks of the old elite and its corrupt ways, as well as of the dead-end austerity doctrine. But some reforms, like the push to force Greece to privatize public assets like airports and seaports, are highly contentious and less obviously beneficial.

One thing is clear: The details of the reform package will have to be renegotiated now that Greece has a populist new government that doesn’t support the neoliberal agenda. If the troika were to refuse renegotiation, that would amount to a bold statement that the European Commission doesn’t recognize Greece’s sovereignty and doesn’t respect the outcome of democratic elections.

That would be fatal to the European project. Europe is meant to be a club of nations working toward closer union, in mutual solidarity, through good times and bad. It cannot be allowed to continue to evolve into a collection of increasingly resentful and alienated nations, in which stern creditor nations control and punish supplicant debtor nations.

Germany owes Greece solidarity

Greece’s view of Germany has darkened over the past several years. Greek memories of Nazi Germany’s brutal occupation have revived, and calls have been made for Germany to pay hundreds of billions of euros in restitution for the damage caused – including repayment of loans the Nazis forced Greece to make to Germany then. German authorities say all claims were settled decades ago.

The legal ins and outs of war-reparations claims are debatable, but the moral conclusion is not. Europe showed Germany forgiveness and solidarity after its insane rampage across the continent. Now it’s time for a new, democratic and European Germany, arisen in strength from the rubble and ashes of its past, to show solidarity – and to forgive Greece its own, lesser mistakes; specifically, the old culture of corruption the country is visibly trying to transcend.

Two simple moves would help revive faith in Europe

There are two things Germany could ask Europe to do that would demonstrate tangible solidarity with the people of Greece.

The first and most important is to organize a massive program of European-financed infrastructure investment in Greece and in the whole southern eurozone. Investment is needed to create jobs, build a modern economy, and restore economic demand.

I outlined the best way to finance this in an op-ed last week. The European Commission should instruct the ECB to redirect its new bond-buying program – a massive flow of 60 billion euros a month – toward real-economy revival, by buying newly issued Sustainable Infrastructure Construction Bonds from the European Investment Bank. That would suffice to fund a European renaissance, and rescue the credibility of the European Union in the minds and hearts of our continent’s citizens. Greece should be among the first destinations for these investments.

The second thing is to ask Greece’s creditors, the wealthier nations of Europe, to unilaterally renounce interest payments on Greece’s accumulated debt load – easily done by converting existing bonds to zero-interest bonds of long maturity – and to reschedule future payments of the debt principal to a pace that won’t be a burden on Greece’s recovery. Say, no more than 0.5 percent of GDP per annum.

It’s time for Germany to show a greatness of heart to match its greatness of economic productivity, by extending real solidarity to the people of a founding European nation whose cultural legacy has inspired our continent for millennia.

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