5 Myths About the Greek Debt Crisis

by Simon Bruehl
File under: Fake Freedom21 Jun 2015 12:37 EDT

I'm sure you're familiar with standard debt narrative here in the US:

Once upon a time, an honorable and generous creditor provided money to a lazy and scurrilous debtor.  That debtor now refuses to pay, obviously, but the debt must be repaid at any cost.  Under no circumstances can the creditor be considered irresponsible for making a bad loan.  If the creditor ends up going bankrupt through lack of foresight or malpractice, then it is the government's duty to provide financial and/or legal support to the creditor.  Only then can justice be served.  The end.

It doesn't matter which particular debt crisis you're talking about, this little story always applies.  You only have to change the names of the starring characters: they could be students and student loan agencies, homeowners and mortgage brokers... or Greeks and European financial institutions.

While this story might contain some scrap of reality in the US, it is pure fantasy when applied to Europe.  But that hasn't stopped it from being repeated endlessly or from spawning a whole set of oft-repeated "truisms" about the Greek debt crisis. Unfortunately, most Americans don't know enough about Europe (or anything outside of the US for that matter), to see the shocking falseness of these statements.   Fakenation, as always, is here to help. 

Let's analyze the most common myths.

1.  Greece is a poor country, if not the poorest country in Europe.

Utterly bizarre.  Even in 2014, long after the brutal austerity program was introduced, Greece still ranks #25 in the world for per capita income, at $29,000 per year.  In 2009, before the major cuts, the figure was slightly higher: $32,000.  Relative to the rest of the countries in the European Union, Greece ranks somewhere in the middle.  The poorest countries in the EU are much, much poorer.  Bulgaria and Romania round out the bottom with per capita incomes of just $7,700 and $10,000 respectively.  Germany, the "rich" country, had a 2014 per capita income of $47,000.  This is certainly higher than Greece, but well below the figure for the US: $54,000.  In American terms, most of the EU is poor, including Germany.

2.  The EU was created for economic reasons.  Greece never should have joined the EU because it wasn't rich enough.

According to all of the major news outlets in the US, it is a fact that the EU was supposed to be an elite financial club, and somehow Greece was let in but just couldn't punch in that weight class, so now it should, appropriately, leave.  The gross misrepresentations here are astounding.

I won't go quoting all of the relevant articles in the EU constitution or the Copenhagen Criteria, which immediately disprove these claims, I'll just leave you with a few facts to consider.  Turkey, a country on the European continent with a very large economy (certainly larger than Romania's or Bulgaria's), has never been admitted to the EU.  Yet Italy, one of the "poor" PIIGS countries, was a founding member of the EU.  Does it not compute?  Try this on: the EU was established on the basis of shared cultural values, not for the purpose of getting rich (which is the only reason why any agreements are made in the US).  Of course, nobody even knows what "shared cultural values" are here, so you might be excused.  And Greece is not an outlier in the EU or even a recent addition.  It applied for membership in the mid-1970s and joined the EU in 1981, before some bigger or better-known countries like Spain, Austria, and Sweden.  It was probably poorer at the time of its application than it is now.

3.  Germany is similar to the US in that it is rich and fiscally conservative, and it has never had to deal with ugly aspects of life like staggering debt, starvation, poverty, and communism.

It is often assumed that the new government in Greece is "communist" while Germany is "free" — specifically, free of communists.  No one seems to remember that about half of Germany was under Soviet communist rule until 1990.  Part of the legacy of the Soviet occupation is a large leftist political bloc, similar to Greece's SYRIZA, which is called Die Linke (The Left).  This bloc has consistently supported Greece in the German parliament.  And lest we forget, the former West Germany was home to the radical and violent Red Army Faction during the 1960s. 

Republicans please note that Germany today, like Greece, is a democratic socialist country and identifies itself as such.  It is not the "America of Europe" or in some state of denial about its mode of governance (as we are).

In 1945, after the war, Germany was decimated, broke, and starving.  It owed crippling war debts to the military victors, particularly the US.  Realizing that Germany could never rebuild if it were to honor its debt obligations, President Truman canceled the debt and instituted the Marshall Plan (also known as the European Recovery Plan).  To repeat: the US did not force austerity onto Germany in its humiliated condition, although it could have.  The US actively invested in Germany, which ultimately led to Germany's great progress in the second half of the 20th century.  One way of looking at the current situation in Greece: Germany is arguing for austerity, when this same nation prospered by the lack of austerity imposed by its own creditors.

It might also be worth pointing out that the "fiscally conservative" Germans witnessed the total collapse of their own currency in the 1920s, something that hasn't yet happened in the US.  The worthlessness of the Deutschmark was one of the factors that precipitated the more unfortunate military events decades later.  If you bother to do the reading, German history looks much more like Greek history than American history.

4.  Greece and Germany dislike each other.  This may be due to "racism".

This is too bizarre to even address properly, yet it persists.  There is no evidence to indicate that Greeks and Germans generally dislike each other — aside from recent statements made by each country's politicians during the heated negotiations.  There is and has always been a high degree of cultural and economic exchange between the two countries.  Greece even has its own Hitler-worshiping "neo-Nazi" party.  As for the racism claim: only a country like the US, with its deranged obsession with the idea of race, could possibly imagine some racial dimension to this situation.  And how that would work, I have no idea, since both countries are "white".  Is it the sun-tans vs. the no-tans...?

5.  Abandoning the Euro currency (Eurozone) means leaving the European Union.

Sloppy journalists often conflate the Eurozone (monetary union) with the EU (political union).  Many EU countries still use their own currencies, including Sweden, Denmark, the UK, the Czech Republic, Hungary, and Poland.  If Greece returned to using its old currency (the Drachma) it would not be a particularly shocking development.  And it would not automatically require the abandonment of the EU (political union).  The vast majority of the Greek population has repeatedly indicated that it has no desire to leave the political union.  Since any decision on this issue would have to be done by political referendum and not executive fiat, the likelihood of Greece leaving the political union is slim to nil.


While it's sad (and extremely boring) to watch this little debt narrative play out once again — a remake of a remake of a remake — it's perhaps more sad to recognize the ignorance of the passive observers in supposedly advanced countries like the US.  The fact that so much of the professional reporting on this issue is based on obvious falsehoods that no one seems to care about double-checking, let alone questioning, bodes ill.  Ignorance is a far greater threat than any debt real or imagined.  Lack of knowledge will always leave you dependent upon the knowledgeable.

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