As leaders of the Syriza-led government of Greece participate in high-stakes meetings with their European creditors in Brussels on Monday, New York Times columnist and Nobel Prize-winning economist Paul Krugman is among those urging the so-called Troika negotiators—representing the IMF, the European Central Bank, and the European Commission—to do what is right by giving Athens the chance to unburden itself from the harshest austerity measures and reach a compromise deal on future lending.
Placing the current crisis in Greece in historical context as he compared it to the Weimar Republic of Germany following War World I, Krugman argues that Europe risks a much larger catastrophe if it continues to treat Greece as a defeated enemy.
Syriza's chief negotiator and finance minister Yanis Varoufakis has also made the comparison to post-war Germany and argued that debt forgiveness and reduction of austerity would insulate Greece from the rise of the nation's far-right forces, exemplified by the neo-Nazi Golden Dawn party.
According to Krugman, Varoufakis' warning about what will happen to Greece if his government is not allowed to renegotiate the terms of the bailout program agreed to by the previous government should not be taken lightly. "More than ever," writes Krugman in his Monday column, "It is crucial that Europe’s leaders remember the right history. If they don’t, the European project of peace and democracy through prosperity will not survive."
In cities across Greece on Sunday, citizens came out in force during rallies designed to show support for the Syriza-led government ahead of Monday's talks. Solidarity demonstrations were also reported in cities across Europe where residents of other nations called on the EU ministers to end their harsh commitment to austerity in Greece and elsewhere.
As Agence France-Presse reported:
In Paris, around 2,000 people walked through the city centre in a show of solidarity against what organisers called "the Goliath of finance".
Marchers unfurled flags from the hard-left Syriza party of their new prime minister and chanted: "In Greece, in France, resistance against austerity and finance."
In Lisbon about 300 people took to the streets with banners reading "Greece, Spain, Portugal, our battle is international."
"We want to express our solidarity with the Greek people to defend their right to decide their own future," said Paulo Coimbra, a 46-year old economist and one of the organisers of the march.
"We contest austerity in Portugal as well, it's time to say 'enough' to the grip financial power has on political power," he added.
In an interview over the weekend, Greek Prime Minister Alexis Tsipras said he expected "difficult negotiations on Monday" in Brussels, but added he was "full of confidence" that an acceptable deal to both sides could be reached.
However, as the Greek newspaper Ekathimerini reports, the two sides are still very far apart on the deal:
Optimism [expressed by Tsipras] was curbed by German Finance Minister Wolfgang Schaeuble, who said he's "very skeptical" that a solution can be found at the meeting in Brussels.
Volatile Greek shares were down 3.6 percent in midday trading, while the eurozones Euro Stoxx 50 index shed 0.1 percent.
"Greece must see that you can’t keep living above your means and then keep making proposals for how others should pay even more," Schaeuble told Deutschlandfunk radio. Athens wants a substantial easing in the terms of repayment of its 240 billion euros (currently $273 billion) in rescue loans, which it has received from other countries that use the euro and the International Monetary Fund, as well as less budget austerity.
According to the Guardian newspaper's live coverage from Brussels on Monday, no progress has yet been reported, but many European ministers at the talks appeared unmoved by the reforms Greece has so far put forward.
That display of intransigence, however, is exactly what the anti-austerians, like Krugman, are worried about. He writes:
What would happen if Greece were simply to refuse to pay? Well, 21st-century European nations don’t use their armies as bill collectors. But there are other forms of coercion. We now know that in 2010 the European Central Bank threatened, in effect, to collapse the Irish banking system unless Dublin agreed to an International Monetary Fund program.
The threat of something similar hangs implicitly over Greece, although my hope is that the central bank, which is under different and more open-minded management these days, wouldn’t go along.
In any case, European creditors should realize that flexibility — giving Greece a chance to recover — is in their own interests. They may not like the new leftist government, but it’s a duly elected government whose leaders are, from everything I’ve heard, sincerely committed to democratic ideals. Europe could do a lot worse — and if the creditors are vengeful, it will.