Alexis Tsipras (New Greek PM) - Open letter to the German readers: That which you were never told about Greece about Greece

You don't get it. I don't want you to declare how much you care about greeks, I don't care about this conversation, or about them for that matter.

We have a problem. The problem is that we have an economy in the eurozone that can't service its debt. This is partly because of the capital bleeding caused by the structure of the eurozone and partly because that specific economy was very weak already due to its well-documented chronic inefficiencies and then a recession hit. This is a problem because if we let it default and it gets out of the eurozone, the market will ring its bells and inform the major market players (those that haven't had losses already) of what just happened, warning them of the danger, which will result in every other country in a remotely similar condition having serious trouble refinancing its debt (since uncertainty will shoot for the moon). This is a problem because then you'll either have to refinance their debt with an amount of money that will make the greek "bail-out" look like funfare (and which is politically unsustainable) or you will let them default as well. That's the way you crush this eurozone with no survivors. However the euro is the second largest reserve currency in the world. Do you remember the panic when the swiss mark disentangled itself from the euro? That was minor. Now imagine the second largest reserve currency going "poof" and dissapearing. We just caused a third and greater great depression. When people are talking about how safe we are from a default, they are usually talking about the systemic banks that have already rid themselves of greek toxic assets, they are not talking about the possible costs of the above, or of the costs of the dissolution of the common market and the erection of protectivist barriers that will stop the capital inflows to the net exporting countries, or about the cost of what may follow (seeing that europe managed to turn these kind of antagonisms and pressures to continent-wide shooting matches twice already).

Now, there are four ways I can think of to deal with this -unfortunately real- situation.

  1. Pretend that austerity worked, the greek debt has magically become viable and they can now refinance it on their own. Wait until reality decides to pay a visit.

  2. Decide that their debt won't be refinanced by market lenders and try to refinance it yourself, again. Another 5 years and 300BN later you're yet again back to the same position, except that now their debt is even more grandiose than before, at which point you either decide you have nothing better to do and refinance it, again, or you decide to solve the problem then, losing more money in the process.

  3. Decide that their debt won't be refinanced by market lenders and there is no point in playing extend-and-pretend, but you refuse to comprehend that they can't service their debt. Keep desperately screaming "greeks pay denbts" at the top of your lungs as if that will change anything in the capacity of a state to pay an unsustainable debt until they eventually have to default because all the self-righteous anger in the world doesn't cause reality to lift her brow. At which point you will either a) decide that was not the greatest idea and have to pay exorbitant amounts to save a crippled eurozone that is falling apart or b) decide to yell #yolo and let the entire european economic environment implode and see where that gets us. C) keep crying "eurozone stronk eurozone safe", even as the links begin breaking apart.

  4. Understand that the debt won't be refinanced by market actors, that wasting money on a state with an unsustainable debt doesn't work because that's not a liquidity issue (and in effect you can't bail it out if you wanted to), and either decide to move forward with some form of fiscal transfers, perhaps even in the form of something mild like an internal bretton-woods-like investment-based recycling mechanism or at the very least decide to resolve the entire european debt problem at a central level, which will include either forgiving some of it or freezing repayments on the short term or periodically based on the growth of each of those economies. This doesn't risk quite as much as any other alternative. It is in my opinion, the realist approach.

Either way, the problem is real, the danger of not resolving it is imminent, and putting our hands over our eyes won't make it go away.

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