Guest blogger Peter Martin offers a common sense solution to the new left wing Greek government’s ‘debt crisis’.
Peter Martin is not in anyway associated with, or should be mistaken for, the columnist of the same name who writes for Fairfax.
If debts cannot be repaid they will not be repaid. Debts, in the commercial world, usually end up being settled. If they aren’t settled it is nearly always because debtors cannot pay rather than because they have chosen not to pay. There is a well recognised procedure, in civil law, recognising this truism, which can end up in the bankruptcy of the debtor if a suitable settlement with creditors cannot be satisfactorily negotiated.
Bankrupting a country like Greece when it gets into financial difficulty, however, is not a political option. Unless we want to start another war between Greece and Germany that is! So what are the options? Apart from carrying on, in both senses of the term, in the the present irrational manner there is only one. If Germany (plus other countries such as Holland who also own Greek debt) requires Greece to repay its debts, Germany has to recognise that Greece has to pay in something other than euros, at least not directly, as it clearly does not have anywhere near enough and has fewer now after the application of the supposed economic remedy (punishment?) by the troika than it had previously.
Therefore, it has to pay in real goods and services: Tourism. Olives. Feta cheese. Ouzo. Shipping. Whatever Greece makes, does and sells, Germany needs to buy to enable the debt to be settled. And it needs to buy more from Greece than it sells to Greece. That way Greece ends up with the euros, which pays the Greeks for growing the olives, running the tourist hotels, making the cheese etc . This enables the Greek economy to provide jobs for the unemployed, improve its Government’s tax revenue base, grow its economy, and also enables the Greeks to service, and eventually settle, their German debts.
The same naturally goes for Spain, Italy and even France. In other words, German debts get repaid when, and only when, Germany decides to accept real goods and services instead of euros. This in turn means that Germany has to run an economy more along the lines of the UK and the USA economies and import more goods and services than it exports.