World Politics News   Articles for World Politics Course

The results of the Greek referendum were clear: 61 percent of the Greek people voted to not accept the terms of the troika’s bailout.  The global response to the vote has been largely negative, most analysts suggesting that the Greeks are unwilling to make the sacrifices necessary to sustain what they regard as an indulgent life-style.  Most of those analysts support the German contention that the Greeks must cut more government spending.  That characterization does not square with the actual behavior of the Greek government.  Greece has cut government spending from roughly 13 billion euros to 10 billion euros–a cut of 23 percent.

I am not sure what the German population would do in the face of a 23% reduction in  government spending, but I am not aware of any people that would regard such cuts as indulgent.  For those of you who read German, Zeit  has an interview with Thomas Piketty, the French economist who published the highly influential book, Capital in the 21st Century, in which Piketty notes that:

… Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War.However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.

In 1953, “…the Federal Republic of Germany’s creditors — 20 countries including Greece — indeed agreed at a London conference to write off 55 percent of the country’s 32.3 billion Deutsche marks of foreign debt.”  I suspect that Piketty will not be getting any lecture invitations in Germany any time soon.

Most interestingly, a split is emerging in the troika.  The IMF has indicated that it believes that Greece needs debt relief and that reliance solely on the policy of austerity has not worked.  The IMF report, “Debt Sustainability Analysis”, was released three days before the referendum over the very strong objections of the European members of the IMF.   The US, however, and the vast majority of other members of the IMF were in favor of its publication.  The US has been arguing for some time for debt relief for Greece.