A protester burns a flag of Germany during a protest in Athens: Making enemies with an entire people
The following excerpt from Germany’s Spiegel could easily be applied to the United States whose debt dwarfs that of Greece. The question is not if Greece will go bankrupt but if the European Union will be able to stop the contagion when it does. The people in Greece are burning the German flag; the occupiers in Oakland are burning the United States flag.
Greece Must Go Bankrupt
Perhaps, the Greece rescuers on both sides of the negotiating table should try being honest for a change. Here’s the truth: If the country is to lastingly reduce its mountain of debt and, at some point, be able to borrow money on the capital markets again, then it needs a comprehensive debt haircut. In other words, it needs to go bankrupt.
And it’s not just private creditors who will have to forego a large part of their outstanding Greek debts. It is also other European countries and the European Central Bank. That would be expensive for taxpayers across Europe, and it would also be economically risky. Indeed, no one knows what consequences a Greek bankruptcy would have for other crisis-ridden countries like Portugal, Ireland or Italy. But at least it would be an honest solution.
Of course, things wouldn’t stop there. The euro-zone states would also have to build a bigger firewall around the remaining crisis countries in order to prevent contagion. They would have to help some banks that get into trouble as a result of a debt cut. And they would have to provide Greece with a real opportunity to get back on its feet and start growing under its own steam — in other words, a kind of Marshall Plan.
All this would be very expensive, and German taxpayers would also be forced to do what they have feared from Day One — which is to pay for Greece. But this solution has two major advantages. The payments would be limited, and they would actually help Greece.
And unlike everything that has been negotiated up until now, the solution would also be worthy of being called a rescue package.