I’ve made this point before, but it might bear repeating in light of the referendum in Greece.
One might think Germany, whose entire last century was shaped by debt it owed in a currency it did not control, would recognize the potential harm in insisting that creditors must not take a haircut.
It is also disturbing that, given the chance of bringing actual anti-Semitic fascists to power in Greece if the Socialist-led government were to collapse, Europe and the troika (BAND NAME!) was unwilling to take a financial hit to prevent that from happening.
Not enabling societal unrest and fascism seems like a pretty good baseline economic metric.
mikethemadbiologist
This hard line, at the moment, strikes me as an attempt by the Troika to cover their asses for two mammoth mistakes.
One, they used EU money to bail out a bunch of international bankers who were stupid enough to lend money to Greece. Moral hazard seems only to apply to non-bankers. If they give in now, there are likely to be a number of European citizens (especially the taxpayers) asking why the banks were bailed out using ‘their’ money.
Two, the austerity approach has been a failure across Europe, Greece is only the exemplar. A number of countries are likely to start seriously questioning Merkel and the European Central Bank’s bad policies. This is starting to be a real threat to the current EU leadership and they must be scared.
Unfortunately they probably think that with a bit of finessing they can keep things stable. A lot of statesmen in July 1914 thought that way.