There’s quite a bit of fulmination this morning over the Greeks’ rejection of what Mish Shedlock has referred to as “perpetual slavery” in favor of what they apparently think is calling the European finance ministers’ bluff but nobody knows for sure what. The remarks of the editors of the Wall Street Journal are pretty representative (it’s the second item down, or thereabouts):
It’s true the Greeks were given two bad choices, but they still chose the worst. Europe was offering more money to forestall a crisis in return for pension cuts and other reforms. Greek Prime Minister Alexis Tsipras claimed a “no” vote would help him extract better terms—by which he means even higher growth-killing taxes in return for fewer pension cuts. The Greeks chose the Tsipras ultimatum strategy, so they can’t blame the Germans for what comes next.
The big question now is whether German Chancellor Angela Merkel and other Europeans will flinch. Mrs. Merkel has not wanted to be seen as driving Greece from the eurozone, and the referendum means that the Greeks will have driven themselves out, if that’s what happens in the coming weeks. Mr. Tsipras will claim he has a mandate to demand more European concessions, but that mandate ends at the Greek border. He has no open-ended claim on the other taxpayers of Europe.”
Well, not exactly. The European Central Bank and the IMF (i.e. non-members of the eurozone) are actually picking up a lot of the tab at this point. Meanwhile, breathes there a man with soul so dead who will not be incensed over what emerges from this interview at Die Zeit with the most famous living French economist, Thomas Piketty, the gist of which is that the prescription the Germans are offering the Greeks is one they’ve never followed themselves:
DIE ZEIT: Should we Germans be happy that even the French government is aligned with the German dogma of austerity?
Thomas Piketty: Absolutely not. This is neither a reason for France, nor Germany, and especially not for Europe, to be happy. I am much more afraid that the conservatives, especially in Germany, are about to destroy Europe and the European idea, all because of their shocking ignorance of history.
ZEIT: But we Germans have already reckoned with our own history.
Piketty: But not when it comes to repaying debts! Germany’s past, in this respect, should be of great significance to today’s Germans. Look at the history of national debt: Great Britain, Germany, and France were all once in the situation of today’s Greece, and in fact had been far more indebted. The first lesson that we can take from the history of government debt is that we are not facing a brand new problem. There have been many ways to repay debts, and not just one, which is what Berlin and Paris would have the Greeks believe.
What’s missing from the bitter criticisms of the Greeks is a solution. With worldwide slow growth, low interest rates, and in the absence of substantial foreign investment in the Greek economy, what are the Greeks to do? Since the imposition of the IMF’s formula their economy has nearly collapsed. Are we to believe that there is some floor for the Greece economy and, once it hits it, Greece will begin to grow again? Or is the idea that the Greeks be permanent debt slaves?