Bryan Gould: EU power brokers have guilty role in Greek tragedy

Greek Prime Minister Tsipras' difficulty is that he has committed to resist austerity but also retain the euro. It's doubtful he can achieve both, says Gould. Photo / AP

Most people will feel they don't need to look far for an explanation as to what lies behind the Greek crisis. Lazy reporting and racial stereotyping will persuade them the Greeks have spent more than they should, got into debt, taken out loans from the hard-working Germans and now won't repay the loans because they refuse to tighten their belts.

But another narrative tells a somewhat different story, one of a powerful economy enforcing its will on its weaker neighbours and refusing to acknowledge it has thereby made it impossible for them to dig themselves out of a hole.

The story begins in 2000 when the Greeks, along with many others, were persuaded that being part of Europe required them to give up their own currency and accept the euro. A single currency meant a single monetary policy and a single central bank, and guess who decided what that policy should be and what the central bank should do?

Germany, by far the most powerful economy in the eurozone, ran it to serve its own interests but life wasn't so easy for the weaker countries. The Greeks, for example, with their smaller and less developed economy, had no chance of surviving the competition from efficient German manufacturing. We don't need hindsight to make this point as many commentators, myself included, foresaw this inevitable outcome at the time.

As things began to go wrong, and they had to borrow to keep their heads above water, the Greeks were assured they could look to the Germans and others to help them out. But this was in the days of cheap and plentiful credit; when the Global Financial Crisis struck and the cheap credit dried up, the creditors who had happily lent to the Greeks wanted their money back.

The Greeks didn't have the money. But the price they had to pay for borrowing yet more from the IMF and the European Central Bank was to accept a programme of savage austerity. The cuts they have already been forced to make have meant that 25 per cent of the Greek economy has simply closed down and 60 per cent of young people are without a job. Again, as some commentators observed at the time, it was impossible to see how the Greeks could ever - from an already weak economy that is now so much smaller and still going backwards - find the resources to repay their debts.

And so it has proved. The price creditors insist on for a continued bailout is yet more austerity which can only mean yet more closures and unemployment. Leaked papers show the creditor institutions themselves recognise more austerity will make it even less possible for the Greeks to pay back their debts.

So why are the Germans and other creditors determined to force the Greeks into such a damaging dead end? The answer is they care little for the travails of the Greek people. Their focus is on those countries watching the Greek situation closely - Spain, Portugal, Bulgaria, Italy - which have faced similar problems and suffered similar penalties but have not yet been compelled by pressure from their populations to resist a further descent into more austerity.

The fear from the financial establishment and the Germans in particular is that the Greeks might find a way to show other similarly afflicted eurozone countries there's a way out - and that those countries would follow a similar course. The rational course for the Greeks to take, after all, would be to leave the eurozone, restore their own currency and print the drachmas needed, as monetarily sovereign countries are able and entitled to do, and repay their debts in devalued drachmas.

Greek Prime Minister Tsipras' difficulty is that he has committed to resist austerity but also retain the euro. It's doubtful he can achieve both. In the referendum, dislike of austerity prevailed over fear of leaving the eurozone. The poor and unemployed, who have suffered most from austerity, will have voted to reject the bailout; asset holders and pensioners will have voted to stay with the euro.

The outlook for the common currency looks bleak. In the long run, the financial establishment's attempt to override the interests of ordinary people and negate the power of a democratic government to protect them will fail. But how many more crises and how much more suffering will there be before common sense wins?

Debate on this article is now closed.