The Great Recession of 2008-09 damaged many national economies but none as seriously as the Greek economy. The budget deficits that the Greeks had run up prior to the recession were impossible to manage and Greece was forced into three bailouts financed by the International Monetary Fund, the European Commission, and the European Central Bank (commonly referred as the troika). These bailouts required Greece to undertake draconian cuts to virtually every aspect of government spending, including pensions, food and housing subsidies, and government employment. The end result was a dramatic shrinking of the GDP of the country and it does not appear as if the cuts really led to an environment of economic growth as promised by the troika. But the privation imposed on Greece was also a message to other European states with budget deficits, as noted by James Galbraith:
“But the damage done extends far beyond Greece. The cynicism and brutality of what happened there is for everyone to see. The fact that Europe imposed a policy of privation on one of its weakest members—not for its own sake, and not with any expectation of economic success, but to intimidate the Italians and the French, as the German Finance Minister Wolfgang Schäuble conceded to the Greek Finance Minister Yanis Varoufakis privately in 2015—was not lost on British voters who chose Brexit in 2016. The Greek debacle helped to turn the French left against Europe, and fueled the inchoate coalition now in power in Italy. The German and east European far right is surely not motivated by sympathy—on the contrary, they despise the Greeks. But they do resent the supposed “solidarity”—a fiction if ever there was one—that Germany’s Chancellor Angela Merkel and her allies invoked to sell their parliaments and voters on the idea of the Greek loans.”
Needless to say, the recent improvement in the Greek economy, as well as for the Italian, Spanish, and Portuguese economies, occurred during a period when the global economy was expanding. It is hard to tell what will happen if the global economy slows down, and the debts of these countries will become more difficult to service.
Malaysian Prime Minister Mahathir Mohamad has cancelled two large infrastructure projects being funded by China to implement the Chinese Belt and Road Initiative. (BRI) The Malaysian decision is based on two considerations. First, Malaysia fears the economic costs of the debts involved in the projects. Second, the Prime Minister has voiced concerns over Chinese influence through the BRI. According to the Financial Times:
“Malaysian prime minister Mahathir Mohamad has warned against ‘a new version of colonialism’, in a pointed expression of Asian unease about China’s increasing economic and political influence in the region.
“‘We should always remember that the level of development of countries are not all the same. We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries, therefore we need fair trade.’”
An example of what the Prime Minister fears is the way the Chinese took control of a major port in Sri Lanka. The New York Times describes how the port passed into Chinese hands:
“Over years of construction and renegotiation with China Harbor Engineering Company, one of Beijing’s largest state-owned enterprises, the Hambantota Port Development Project distinguished itself mostly by failing, as predicted. With tens of thousands of ships passing by along one of the world’s busiest shipping lanes, the port drew only 34 ships in 2012.
“And then the port became China’s.
“Mr. Rajapaksa was voted out of office in 2015, but Sri Lanka’s new government struggled to make payments on the debt he had taken on. Under heavy pressure and after months of negotiations with the Chinese, the government handed over the port and 15,000 acres of land around it for 99 years in December.”
The Chinese strategy mirrors the US use of “dollar diplomacy” in the early 20th century to gain control over the economies of several Central American states.
The Chinese Belt and Road Initiative
World Politics News 
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