Economist Thomas Piketty’s 25 Truths on Greek’s debt

Thomas PikettyThe author of Capital in the Twenty-First Century denounces the Troïka’s and the IMF’s hypocrisy in regard to the debt issue.

  1. In the past, Greece’s public debt has been much more important than what it is today. It is now at €312 billions and represents 170% of the country’s annual production. Greece’s debt, in reality, is a paltry one because the country’s economy only represents 2% of the Eurozone’s GDP cialis original livraison rapide. So Greece’s debt only represents a mere 3% of the Eurozone’s GDP and does not represent a danger for Europe’s economic stability.
  2. Great European powers such as France, Germany and the United Kingdom, have had in the past debt over 200% of their GDP, notably in the 19th and 20th centuries and, each time, a solution was found.
  3. “In the 20th century, France and Germany stand out as two countries that have never repaid their public debt.”
  4. “It is somewhat ironic” to demand that Greece repay its debt while forgetting that “Europe was built after the Second World War on a number of principles, one of which was, notably, forgiving past debts in order to invest in the future.”
  5. To the point, in 1953, Europe decided collectively to abandon all of Germany’s external debt, because it had “chosen the future”.
  6. There are several ways to deal with debt. The slow and inefficient way, as is being done with Greece at this moment, consists in asking the country to produce budget surpluses (more revenue than public spending) and allocate them to debt reimbursement. This method’s shortcomings are that it will take a very long time, more than a century, that it will stunt economic growth, and that it will bring social chaos.
  7. “Above a certain amount of public debt one must use faster methods.” Three have been used in the past: moderate inflation, exceptional taxes on personal wealth and, above all, debt forgiveness.
  8. “There have been debt cancellations in the past and there will be some in the future.”
  9. “Governments do not have the courage to talk about debt forgiveness”, although it is inevitable if we wish to get out of this crisis, and “the sooner the better.”
  10. People in Greece are depicted as living above their means. But, nevertheless, actually, under Alexis Tsipras, Greece’s budget is balanced, if we exclude servicing the debt. There is even a “light primary surplus”, equivalent to 1% of GDP in 2015, or 1.83billion euros. Reimbursing the debt is untenable, considering that private banks have made loans to Greece at loan shark rates, reaching 18%, which makes it mathematically impossible to repay the debt.
  11. International financial institutions are demanding that Greece, under the accords imposed in 2012, allocate 4% of its GDP to reimburse the debt for the next 30 years. “The whole budget of Greece for its higher education system represents less than 1% of GDP. So this is like asking the Greek taxpayer to allocate, for the next 30 years, four times as much money to pay prior debts as it takes to finance the whole higher learning system in the country. Is this the right way to prepare for the future? Of course, not! It is absurd.”
  12. “At the end of the Second World War, and it was a good thing, Germany, France and other European countries were never asked to do that. Debts were forgiven – this is what helped rebuild Europe in the ‘50s. Freed from the weight of the debt, public resources could be allocated for the infrastructures, education and growth.”
  13. “Europe, with the 2012 budgetary treaty, is choosing, like the British in the 19th century, decades and decades of hardship, instead of doing what Europe did after the war by projecting itself into the future.”
  14. “There is an extremely serious amnesia in regard to History. It is mind boggling to realise how little our leaders know about it.”
  15. “The French government is highly responsible” for this situation by refusing to go against Germany’s sternness. “Hollande must be more responsible and declare that debt restructuration must happen now.”
  16. Without strong action there is a risk of “extending the period of uncertainty”, which has a big impact on growth, and of “throwing Greece back into recession, which is extremely serious.”
  17. “There are no more debt problems in Europe than there are in Japan or the United States.”
  18. “There is much hypocrisy in all of that because the French and German banks are quite happy to see the financial assets of rich Greeks being transferred to them and, of course, they don’t tell the Greek fiscal authorities,” thus robbing Greece of fundamental sources of revenue and being accomplice to a gigantic fiscal fraud.
  19. Since 2010, the international financial institutions have made “enormous mistakes in Greece.” Even the IMF recognises having underestimated the consequences of austerity measures in terms of recession.”
  20. Those austerity measures “have led to extreme inflation of the Greek debt” because the GDP declined by 25% between 2010 and 2015. “This is what pushed the debt to 170% of GDP, from 110%.”
  21. “I’m putting myself in the place of the young, in Greece. Are they responsible for what Prime Minister Papandreou did in 2000 and 2002? They are no more responsible for those mistakes than the German youth was, in the ‘50s and ‘60s, responsible for errors of the past. God knows that German governments had done much worse things than Greece’s.”
  22. “The whole eurozone debt has to be restructured. A portion must be forgiven, as has always happened in History.”
  23. “The Greek government has been asking for six months for a debt restructuration,” each time facing the obstinate refusal of the Eurogroup.
  24. Nevertheless, in 2012, Europe had promised Greece that when the country would create a light surplus, the total amount of the debt would be negotiated.” Today, Europe refuses to honour its promise.
  25. “The apprentice sorcerers who pretend that kicking out a member of the European Union in order to discipline the others are extremely dangerous. The European ideal is being destroyed by the decisions of those apprentice sorcerers.”

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