Greeks Bearing Debts
A Heckuva Way to Bail Out Germany’s Banks

The eternal Greek crisis may be coming to a head again. The Wall Street Journal reports:

The steadily fraying finances of Greek households, which for years have made ends meet because of close-knit extended families and savings, form the backdrop to a looming showdown between the Greek government and its creditors.

The government, knowing voters’ exhaustion, is adamant that it won’t legislate a multiyear package of pension cuts and income-tax increases, which the International Monetary Fund says is the only way for Greece to hit its agreed-upon budget targets. The IMF says it can’t participate in Greece’s bailout program without such a package—or, alternatively, without large-scale debt relief from Greece’s German-led European creditors. Germany says the IMF must be involved, but that the time isn’t right for debt relief.[..]

The IMF is holding a hard line partly to put pressure on the eurozone to lighten Greece’s debt burden, say people involved in the negotiations. IMF officials have said Greece’s economy is already overtaxed.

New taxes that came into affect on Jan. 1 are squeezing household incomes further. Economists say even-higher income taxes—in the form of lower tax-free income allowances—could add to a mountain of unpaid taxes. Greeks currently owe the state €94 billion ($99 billion), equivalent to 54% of gross domestic product, and rising, in taxes that they can’t pay. Three in four Greeks can’t pay household bills on time, according to the 2016 European Consumer Payment Report, a private-sector survey.

Extended families often rely on grandparents’ pensions. Further cuts in that lifeline could end hopes for a return to economic growth. Unemployment remains more than double the eurozone’s average at 23%. About 74% of the jobless have been out of work for more than a year and thus receive no benefits.

It’s worth remembering that to a large extent, the German refusal to forgive Greek debt is designed to protect German (and French) banks that made huge and foolish loans to improvident southern neighbors—betting, in many cases, that if everything went south, the other euro nations would bail the banks out. Germany hasn’t bailed out its banks directly; instead, it and other northern partners have used the structure of the common currency to trap Greece in its current predicament, unable to leave the euro without triggering a huge crisis, nor to move forward economically within it.

It’s worth contrasting the German behavior toward the Greeks with the West German attitude toward East Germany. Since 1991, the Germans have poured over a trillion dollars into the eastern half of their country, and while there have been occasional grumbles, Germans have generally agreed that this was a sacrifice that ought to have been made. Even today, visitors to places like Dresden can visibly see the sums more prosperous parts of Germany are pouring in to share Germany’s prosperity and preserve German heritage. (And in Dresden in particular, you will probably also notice the large numbers of West German tourists coming to see a jewel of Germany’s common heritage, so long off-limits and in ruins.)

Though you might love all your family, you will do for your siblings what you won’t for your cousins. The EU experiment has been predicated on the notion that all Europeans are one people; German actions regarding the Greeks and the East Germans show that still is not so. There are tough choices still to be made (because they have been so long postponed) in the euro crisis, but it would be good to start with recognizing a few basic, if uncomfortable, truths.

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