Wednesday, April 8, 2015

Should Greece Repudiate Its Debt?

My understanding is that the Greek parliament has approved the formation of a socalled 'Debt Truth Committee'. Its job is apparently two-fold: (a) determine how and why the debt came into existence and (b) audit the circumstances under which the bail-out loan agreements were negotiated and concluded.

Regarding the first question, the Committee could save itself a lot of time if it read this analysis by Yiannis Mouzakis of MacroPolis. Mouzakis presents the debt development since 2000. I suppose he could expand it back to 1981 without too much additional effort.

The other question seems a lot more relevant. There have been conspiracy theories that the 2009 budget figures had been 'massaged' by the EU to justify a harsher adjustment program for Greece which would have a deterring effect on other countries. If the Committee could clarify this question beyond doubt, it would certainly be its self-justification. I would consider it highly unlikely that such a clarification will be the outcome.

And today I read a justification for the Committee by Zoi Constantopoulou, President of parliament, which falls into the category of being 'cute'. She says the 'Debt Truth Committee' will investigate how much of the debt is "illegal" with a view to writing it off. 

Someone ought to explain to Ms. Constantopoulou that it is never the borrower who can write off his debt. Only the lenders can do that. The borrower can repudiate his debt and of all the possible financial faux-pas', one of the few which Greece has not made (yet) since the new government assumed power is the outright repudiation of debt.


  1. Dear Klaus,
    as so often, you are perfectly right.
    And if the Greeks want to know who is responsible for their debt problems, they don't need a committee; a mirror is sufficient.

  2. And so it is.

    I like the way you chose your words, Herr Kastner, very much.
    You put the Ms. on her place, you correct her (she needs that, not only in this case: Venizelos was often explosive furious, and used his highest voice-volume to put her on her place, to correct her, to teach her about law and justice, about what is written) and she can say thank you that you named her Ms.
    Very polite. Even if it could be meant cynical. ;)
    She can learn from you. In facts and behavior.

    By the way. She radiates an energy that reminds me of a tank.

  3. Sorry but I could not resist writing this sarcastic comment:

    Of course Ms. Constantopoulou is in a position which allows her to write off the whole debt.

    Quite a similar approach has been taken by Cristina Fernández de Kirchner, who refuses to act according the verdict of a law court in New York.

    In both cases remains to be seen, whether such unilateral action can be sucessfully upheld for extensive periods of time ;)


  4. This illustrates not only Lady Constantopoulous' but the whole governments mindset.

    To quote Yiannis Mouzakis:

    "Paradoxically, the committee will investigate the period from October 2009, which is effectively the phase when the country’s insolvency was managed rather than created. This adds to the plethora of indications to date that the country’s political personnel refuses to face reality. It also raises serious issues about the capacity of the same people to take Greece out of the economic and social catastrophe the last five years have brought."