Δευτέρα, 20 Ιουνίου 2011

A sorry end to too fleeting a Greek dream

by Mark Mazower

Financial Times

June 16, 2011

These are painful days for anyone who loves Greece. A series of austerity measures, requiring courage and sacrifice, has turned out to be insufficient. The public mood, initially supportive of the need to end years of fiscal profligacy, is increasingly hostile. People have come on to the streets in thousands to protest against the failed leadership of an entire political class – the same class that was credited with restoring democracy to the country in 1974 after the dictatorship of the Colonels. Democracy was supposed to have brought an end to foreign servitude; entry into Europe and membership of a club of equals rather than a new kind of subordination. Now all this has been thrown into question.

A few months ago, I would have said Greece had no alternative but to swallow whatever medicine the European Union and the International Monetary Fund prescribed. Now, I wonder. But default is not pretty to contemplate and its consequences remain unclear.

Greece has cut and run from its foreign obligations before – at the height of the interwar depression in 1932. A comparison of the situation then and now underscores the gravity of the crisis. When the Venizelos government abandoned the gold standard and stopped payments on its debt, it did so with reluctance and paid a heavy electoral price. But the material costs were bearable. One reason was that other countries were being pushed into bankruptcy. Because the entire international monetary system seized up, interwar Greece lost relatively little in terms of credit forgone. Creditors grumbled of course. But Greek state debt was held mostly by private individuals in western Europe and the US; their pain did not count for much. Surprisingly, default did not really harm Greece’s economy. Protected from foreign competition by currency restrictions and trade barriers, it grew rapidly through the decade, and important new industries developed. In short, reneging on one’s debts was not a bad idea in the 1930s.

Professor Mazower is a professor of History at Princeton University.
He is the author of, among many other books on modern Greece: Salonica, city of ghosts. 
MHM

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