Mark Blyth spends a large part of his recent article, “A Pain in the Athens: Why Greece Isn’t to Blame for the Crisis,” pointing out that much of Europe’s bailout money for Greece has been used to pay back loans made by European banks. He concludes with a quote from former Bundesbank Chief Karl Otto Pöhl that the Greek bailout “was about protecting the German banks, but especially the French banks, from debt write-offs.” From this observation, which is substantially correct, Blyth goes on to draw conclusions that aren’t.
Blyth is absolutely right that the “bailouts-on-the-quiet,” in which Greece was “a mere conduit,” were a complete disgrace. But they weren’t a disgrace committed on the Greeks, nor did they increase Greece’s debt burden. They were a disgrace committed on the taxpayers in the countries providing the bailouts, who, as Blyth and many others have pointed out, will be “stuck with the bill” once the inevitable write-off occurs. But that doesn’t make Greece blameless for the original debt and the crisis it has generated. The country racked up huge debts; if it didn’t now owe money to the troika, it would certainly owe it to someone else and its economic problems would remain.
Blyth is equally wrong when he claims that the troika creditors are responsible for the austerity in Greece. Blyth gives figures for the amount of bailout money that actually “went toward keeping the Greek state running.” Others have offered their own assessments. According to Stanford’s Jeremy Bulow and Harvard’s Kenneth Rogoff, over 80 billion euros ($87 billion) in net new loans and aid were provided to Greece from 2010 to 2013, roughly equal to ten percent of its GDP. Although you can argue about the amount, what is clear in any case is that the net flow of money to Greece has been positive, which means that whatever economic pain the Greeks have endured from austerity, it would have been worse without the
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