The mistakes of Greece’s creditors

The mistakes of Greece’s creditors

A lot has been said about the mistakes made by Greece’s lenders during the bailout programs. The fact is they made many errors, including some serious ones. Meanwhile, Greek politicians were responsible for refusing to take ownership of the required reforms and failing to reach a degree of basic consensus. 

Many of these mistakes have been well analyzed, but others require further attention: 

Mistake 1: The negative stereotyping of Greece by Northern European politicians (mostly German) and news organizations in the early bailout years. It was a mistake because the stereotyping, at the same time, also played into the hands of populists in Germany, who complained that the money of local taxpayers was being used to bail out the “useless” and “lazy” Greeks. Meanwhile, there was barely any self-criticism over the fact that German firms were implicated in most of the scandals that broke out in Greece. 

Mistake 2: Greece’s creditors ought to have recognized the country’s efforts in 2014 when the first primary surplus was achieved.

They should have granted Greece some debt relief then as a reward and incentive for further reforms. They failed to do so, and instead came up with unreasonable and cynical excuses to justify this.

We would most likely not have avoided the upheaval of a SYRIZA government anyway. However, their behavior at the time was unfair and unwise. Many foreign officials now admit this in private, but the damage has been done.

Mistake 3: Greece is owed an apology from all those fancy American economists who gave the wrong advice first to George Papandreou and, subsequently, Alexis Tsipras. In late 2009 and early 2010 they insisted on the need for an expansive fiscal policy and advised against austerity.

Some of them suggested that we just write off Greece’s debt and make a fresh start. When you are observing things from Manhattan, it’s easy to recommend that a country take risks that could prove suicidal. But these people did not learn from their mistakes. They did the same during SYRIZA’s first spell in government, either by proposing that Greece leave the euro or by recommending potentially catastrophic blackmail tactics.

Only Paul Krugman offered a half-baked apology, saying that perhaps he was wrong on Greece.

Mistake 4: A section of the Anglo-Saxon and European press had portrayed SYRIZA as a reformist force that would streamline the corrupt public administration, uproot the domestic oligarchy and install meritocracy. The truth is that Greece needed what they were prescribing, but of course that never happened.

Instead, Greece was transformed into an anthropological experiment that many people exploited for their own ends. But for most of these people, their interest in Greece was fleeting, and when they are pressed to make self-criticism, they always seem to come up with a convenient answer: “You know Greece. It has gone bankrupt so many times, and it will most likely go bankrupt again.” We can only thank them for their snippets of wisdom.

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