There are many commentators, like Mark Blyth in Foreign Affairs, that have offered a good overview of why Greece is not to blame. But that does not change the fact that private investors to Greek bonds have aready received a significant haircut and that the money owed has been borrowed.
[Caution: the following paragraph is my first attempt at science fiction]
What should a Greek government unencumbered by clientelistic politics, populism and corruption do? They should have produced restructuring plans with realistic assumptions of growth, policies to improve business confidence and reasoned arguments on how the Greek debt should be handled. This would have implied tackling head-on entreneched interests (lawyers, pharmacists, unions etc); getting civil servants to recognise that they work for the public interest and not the other way around; reinviogarting the legal system to reduce average time to a decision from 4 years to 4 months; upbraiding law and buraucracy to be fit for purpose; demolishing the interconnected interests of public media and oligarchs; tackling the pensions and insurance time-bomb (currently 17% of GDP!). The human talent exists, and all this is feasible. The only thing missing in such a solution are political actors not interested in re-election and I am hard-pressed to think of any such, not because they are universally corrupt but because they are universally self-important. A polity that can reform and improve its discourse can then act as an example to others. Greece is a testbed of the impact of high levels of debt on an economically integrated, (semi) developed and peripheral state. Many in EU’s periphery qualify for that definition. Instead of Greece being an example of how it can be done it is the exact opposite.
As for the level of debt. It is obvious that this debt cannot be serviced at the present state of the Greek economy. The issue with Greece’s partners should be framed in terms of the ethics of growth (and not of evil capitalism as the current incumbents are doing). If it is framed as a long term commitment on a 0% coupon the “capitalist ethic” of Greece’s partners is not offended. Within that ethic there are multiple arguments why the debt should be reduced. If Greece can attain average growth and a balanced budget, in 30 years it will be well below current average debt obligations in the eurozone. For instance, Greece can resume servicing its debt when it is below 60% of GDP as prescribed by EU treaties. This does not mean running recessionary budgets, just a necessity to balance their budgets across the business cycle.
ON SYRIZA POLITICS, plagiarising myself from an earlier entry on this blog: