Why are the Germans so mad at the Greeks?

You can’t get blood out of a stone. The Greek debt will have to be “restructured”[1] for the crisis to end. Germany owns the largest single chunk of the debt[2] and is the dominant force in Eurozone decision-making. The Germans are obdurately refusing to restructure the debt, at least until the Greeks show a firm commitment to economic reforms. This position is opening a gap between Germany and other countries like France, and threatens to drive Greece right out of the Eurozone. Why are the Germans so determined to play the “bad cop”? Here it is worth thinking about two factors.   One is German formative experiences; the other is Greek behavior.

While journalists invoke the great post-WWI inflation as an explanation for German insistence on austerity and probity, a more immediate influence may be that of German reunification in 1990. An old Russian joke about Communism held that “they pretend to pay us and we pretend to work.” The same held true in the former East Germany. Inefficiency went hand-in-hand with feather-bedding. Massive shut-downs of uncompetitive eastern factories followed unification. West Germans bitterly complained of the poor work ethic of the “Ossies.” Unemployment doubled in the eastern territories between 1990 and 1995. Nevertheless, western Germans kept faith with eastern Germans. Wages and pensions doubled in the east,. One informed estimate of the total cost of German reunification between 1990 and 2010 runs to 2 trillion Euros, or 100 million Euros per year for twenty years.[3] Much of this came in the form of subsidies paid from western Germany to the eastern Germany. In the end, however, Germany emerged as the highly-competitive dynamo that dominates the European economy today. No one helped the Germans pay these costs. Two figures in this trauma were Angela Merkel and Wolfgang Schauble. Now they have the same prescription for Greece.

In contrast, the Greeks have behaved disgracefully from one end of this long crisis to the other. Anyone who lives in Britain, Canada, Australia, or the United States knows Greeks to be hard-working and entrepreneurial. Those aren’t the Greeks who were left behind by the great emigration. The Greeks of Greece can excite only contempt. They obtained much of the loans through outright fraud. They spent the money on artificially raising living standards (wages, pensions, public employment), rather than on productive investment that would allow Greece to repay its debts. They ignore the fact that a huge write-off of Greek debt already took place back in 2009. They have tried to prosecute the Greek official who revealed that Greece governments had been “cooking the books” for a decade. From first to last, they have resisted carrying out most reforms so that the economy could return to economic viability. They denounce being asked to pay their bills or to work for a living as “humiliation.” Lots of German tourists have seen Greeks ‘”at work”: for example, 2.3 million German tourists visited Greece in 2007.

The Germans are in the wrong on the need to restructure the Greek debt. The Germans fail to realize that Greece today is a much poorer country than was western Germany when it bailed-out eastern Germany by itself. However, the Greeks are just in the wrong. The Greeks of today are not the Greeks of the Peloponnesian War. Resolution, honor and self-sacrifice are not Greek characteristics today. Neither side seems to recognize the truth.

The truth is that the Greeks will not pay. Do the Germans want to destroy Europe and create a “humanitarian” crisis to make a point? What can be saved of and for “Europe”?

[1] The IMF has recommended a 30 percent reduction and a stretching out of the payment period to reduce annual payments and to allow inflation to further reduce the real value of the obligations.

[2] See the chart at http://www.bbc.com/news/world-europe-33426328

[3] https://en.wikipedia.org/wiki/German_reunification#Cost_of_reunification

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