Germany Showing 'Lack of Solidarity' Over Greece: Stiglitz
'It is time for the U.S. to be generous with our friends in Greece'
Prominent economist and Nobel laureate Joseph Stiglitz accused Germany on Sunday of displaying a "lack of solidarity" with debt-laden Greece that has badly undermined the vision of Europe.
"What has been demonstrated is a lack of solidarity by Germany. You cannot run a eurozone without a basic modicum of solidarity. It is really undermining the common sense of vision, the sense of common solidarity in Europe," the Columbia University professor and former World Bank chief economist told Agence France Presse.
"I think it's been a disaster. Clearly Germany has done a serious blow, undermining Europe," he said. "Asking even more from Greece would be unconscionable. If the ECB allows Greek banks to open up and they renegotiate whatever agreement, then wounds can heal. But if they succeed in using this as a trick to get Greece out, I think the damage is going to be very very deep."
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Paul Krugman wrote Sunday in the New York Times:
Substantive surrender isn’t enough for Germany, which wants regime change and total humiliation — and there’s a substantial faction that just wants to push Greece out, and would more or less welcome a failed state as a caution for the rest...There are only terrible alternatives at this point, thanks to the fecklessness of the Greek government and, far more important, the utterly irresponsible campaign of financial intimidation waged by Germany and its allies.
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Stiglitz wrote on July 8th:
As the Greek saga continues, many have marveled at Germany’s chutzpah. It received, in real terms, one of the largest bailout and debt reduction in history and unconditional aid from the U.S. in the Marshall Plan. And yet it refuses even to discuss debt relief. Many, too, have marveled at how Germany has done so well in the propaganda game, selling an image of a long-failed state that refuses to go along with the minimal conditions demanded in return for generous aid.
The facts prove otherwise: From the mid-90’s to the beginning of the crisis, the Greek economy was growing at a faster rate than the EU average (3.9% vs 2.4%). The Greeks took austerity to heart, slashing expenditures and increasing taxes. They even achieved a primary surplus (that is, tax revenues exceeded expenditures excluding interest payments), and their fiscal position would have been truly impressive had they not gone into depression. Their depression—25% decline in GDP and 25% unemployment, with youth unemployment twice that—is because they did what was demanded of them, not because of their failure to do so. It was the predictable and predicted response to the austerity...
The U.S. was generous with Germany as we defeated it. Now, it is time for the U.S. to be generous with our friends in Greece in their time of need, as they have been crushed for the second time in a century by Germany, this time with the support of the troika. At a technical level, the Federal Reserve needs to create a swap line with Greece’s central bank, which—as a result of the default of the ECB in fulfilling its responsibilities—will have to take on once again the role of lender of last resort. Greece needs unconditional humanitarian aid; it needs Americans to buy its products, take vacations there, and show a solidarity with Greece and a humanity that its European partners were not able to display.