It’s not the North; it’s common sense

To Greeks, the term “austerity obsession” sounds like some kind of metaphysical German fetish. It is perceived as a Protestant quality that stands in stark contrast to the rather expansive view of economics held by the Greek Orthodox people and especially the neo-Keynesian ones. That said, Greece was never quite open-handed when it came to helping countries in the Third World. In fact, pre-crisis budget figures showed that Greece and Italy spent less than any other European country on aid.

The prevalent fiscal policy among both the Greek left and right is one of spending, and according to the rhetoric from 2010 onward, the only way to purge the economy is by having third parties pay off the deficit. Of course this was also going on before 2009, when the markets bankrolled consumption. They didn’t do so for free of course, because they expected to be paid back, with interest.

The markets were scared off by Greece’s deepening deficit and mounting debt, and decided to pull away. It was then up to the taxpayers of other European countries to help us out, and they did, though not to maintain our consumer model and a primary deficit of 24 billion euros, which was where it stood in 2009. After all, they know how to spend money too. They had to help in order to reduce the debt mountain gradually and to give Greece time to repair its economy and increase its output. The eurozone’s leaders decided to reduce the budget deficit from 15.8 percent in 2009 to a primary surplus last year. It was’t going to be easy, but there was no other choice. The other policy, the one of non-Protestant largesse, was nowhere near the table. First of all, no one wants to bankroll it and, secondly, it is simply not sustainable. At some point the economy will just have to produce rather than consume.

The populist argument is that the North is making a profit from the South. The fact is that a monetary union cannot survive for long when there are great inequalities between its members. But this means that countries with a surplus need to give money to those with a deficit so they can produce and not so they can continue to consume.

The austerity policies imposed on the South of Europe are not the product of a Protestant mind-set or a Northern desire to punish the South for having too much of a good time. They are merely common sense: Sooner or later consumption reaches the level of production. The policy for deeper unification, therefore, should be aimed at increasing production (with investments, sharing know-how etc). Otherwise, whether we like it or not, and whether we remain in the eurozone or not, we will have to curb consumption even further.