NPC Graf Zeppelin over Capitol 1928
In its German language edition, Der Spiegel ran a piece last night (translation is mine) about a proposal from the German Green Party (Die Grünen) to deal with the Greek debt crisis that is radically different from how its own government has so far approached the situation. The Greens are not in the Berlin government, but they are a force in German politics regardless, if only because the country loves so much to portray itself as green.
The Green Party’s euro working group, made up of foreign policy, finance and economic specialists, first of all says that, realistically speaking, it will take 10-20 years to deal with Greece’s debt issues.
Furthermore, while many of the Greek problems are ‘home-made’, the “one-sided focus”, on the part of its creditors, on a high primary surplus has led to further economic collapse and thus growing debts. “Austerity is broken and has failed.” (‘die Kaputtsparpolitik ist gescheitert’). Moreover, today’s short-term crisis management, which merely moves from one payment to the next, needs to stop.
Future reforms should no longer target ordinary citizens, but above all the wealthy and the profiteers of ‘nepotism’. If Athens is consistent in applying these reforms, it would be rewarded with further reductions in interest rates and repayment terms.
From this vantage point, the Green Party proposes the following scenario:
• Primary surpluses achieved until 2020 should remain in the country for Athens to finance its domestic programs with, and not be used for debt servicing.
• Greek debts to the ECB and IMF should be taken over – and serviced – by the European Stability Mechanism (ESM) as part of a third loan program, in return for an ‘ambitious reform program’. This loan program would need to stay in place until the Greeks can, as a result of the reforms, service their own obligations again. The reform program should serve to achieve an effective and sustainable government reform, to stabilize the economy and to create a stable framework for investment in Greece.
• Athens wouldn’t have to start servicing its European Financial Stability Facility (EFSF) loans until 2022.
• New and additional loans could be awarded for which Greece will only have to pay interest in times of economic growth. This idea, earlier also raised by the Syriza government, is modeled on the 1953 plan according to which Germany was allowed to pay war debts only in times when it had trade surpluses.
We’ll have to wait and see how much weight the German Greens carry in Europe. They have 10% of the seats in the German parliament, and the European Green alliance has just 7% in the European parliament.
It is, however, obvious that alternative views exist to those prevalent among the troika members, whose unity also threatens to be shattered as substantial differences between EU and IMF standpoints have started floating to the surface.
However it may be, it’s not a plan that Merkel and Schäuble can just sweep under the carpet. They will have to come with a well-argumented response.
And Greece will need to be offered a way to make its next set of debt payments, starting with a big one on May 12.