Germany was choked by its obligations to foreign creditors after World War 1. Today, Greece is facing the same problems.
Under the current austerity measures and repayment obligations, Greece will never be able to get its economy back on its feet. Over the past four years, the austerity bailout has been terrible for Greece: the gross domestic product shrank by almost 20 per cent, trapping more than a quarter of the population in unemployment and pushing debt as a share of GDP to 175 per cent (from a pre-crisis level of 109 per cent!)
Greece's leftist party, Syriza, swept into power on 26th January, buoyed by fiery rhetoric from its leader, the flamboyant 40-year old Alexis Tsipras who promised to renegotiate the terms of Greece's 2010-2012 debt bailouts. Those deals with various European creditors that saved Greece from default and free fall during the global economic crisis, left the country on its knees, crushed under huge loan obligations and committed to wrenching cuts in public spending...
Alexis Tsipras is determined to tackle first and foremost the rampant tax evasion in his country and bring in new investment. He knows that the key to economic growth is investment, especially investment in health and education. He knows that austerity measures that cut basic social safety nets not only cause widespread deprivation, they also destroy any chance for economic growth.
Maybe there is an alternative - a way for Mario Draghi, the head of the European Central Bank and Christine Lagarde, the IMF chief, to save the Greek economy from its tailspin, stabilize the eurozone and lay the foundations for inclusive growth across Europe. The ECB and IMF should swap the Greek debt they hold, about €52 million, for interest free debt that will only come due when Greek's economy gets back on track!
Maybe the ECB should also buy the debt currently held by major European creditors so that Greece can get the same deal across the board. Reasonable repayment terms for Greece would end the human misery of the Greeks and spur economic growth - with long-run benefits that would, eventually, spill across the eurozone...
Jos Edmond Zarb
Birkirkara