I’ve hesitated to weigh in on Greece and the ongoing debt crisis. It’s a complex situation and I don’t think I have much to contribute. But one thing I do know – debt always has two sides, and those two sides are not well reflected in the current debate.
Debt requires two parties – a lender and a borrower. “Debtor and creditor are two sides of a single entity” as Margaret Atwood writes. “One cannot exist without the other”. Unsustainable debt only happens when there is a failure on both sides – a cavalier borrower, and a lender that is either unscrupulous or hasn’t done due diligence.
When a debt becomes unpayable, as Greece’s undoubtedly is, the responsibility for that is shared. Greece has borrowed unwisely, but banks have lent unwisely. Since both sides carry some responsibility for the problem, both sides need to make sacrifices in putting it right.
But that’s not how things have proceeded. All the burden of that unsustainable debt has fallen on the Greek people, while the creditors have been protected. Austerity without debt relief is a one-sided and unfair deal.
The usual objection to debt relief is that of ‘moral hazard’. Writing off Greece’s debts would imply that corruption and financial mismanagement doesn’t have consequences. Other indebted states would expect similar treatment, and good government would generally be dis-incentivised. But moral hazard works the other way too. If Greece doesn’t get any debt relief, the message is that reckless lending is no crime. It encourages the banks to lend irresponsibly, because they know they will be protected regardless.
I don’t pretend to have any new solutions for Greece, but the current outcome is unjust and does the Eurozone no credit whatsoever.
There is a lot of talk at the moment about Greek solidarity – what can we do to stand with the Greek people? There have been hashtags and there’s a proposed protest gathering tomorrow if that’s your sort of thing. The Jubilee Debt Campaign has a petition on Greek debt that you can sign here. If you want to help practically, the country’s medical facilities have suffered most during the crisis and that has led to a shortage of supplies. You can chip in for that here. You may have noticed the ‘people’s bailout’ in the press, which was a nice symbolic gesture if not destined for success. That obviously didn’t reach its funding level, but it’s moved on to a less ambitious fundraising initiative which you can support here.
Looking beyond the immediate crisis, a healthier balance of power between debtors and creditors must be possible. The international community needs a mechanism for national bankruptcy, a process of adjudication for this sort of crisis that protects both citizens and banks, and shares responsibility equitably. The brinkmanship and blackmail of the last couple of weeks is no way to sort these things out in the 21st century.