Dimitri Papadimitriou takes on the assumption that European leaders demanding the continuation of large fiscal surpluses from Greece can claim the moral high ground. The economics behind these demands are unrealistic, and the insistence on full debt repayment is both immoral and imprudent—not to mention deaf to the lessons of history:
“Greece’s government and people have indulged in excesses and corruption; now it is time to pay the price.” The argument for full repayment of Greece’s debt is well known, easily understood, and widely accepted, particularly in Germany. Sacrifice, austerity and repayment are righteous, fair, and just.
That view is coloring this and next week’s coming meetings between Greece and its international lenders, and with European leaders. A revision of Greece’s debt terms has not been on the agenda.
European leadership insists that repayment is possible, and that Greece’s economy will take off, if only Greeks are willing to bite the bullet and economize. The quasi-religious ground under the wishful thinking on economic growth is that with deep financial pain comes high moral ground.
Exactly the opposite case makes far more sense …
In the aftermath of [World War II], Germany was the beneficiary of the largest debt restructuring deal in history. Today, German leaders have positioned themselves as the moral gatekeepers of justice in Europe, with a firm stance against any debt forgiveness. …