Joseph E. Stiglitz writes:\u00a0 European Union leaders continue to play a game of brinkmanship with the Greek government. Greece has met its creditors\u2019 demands far more than halfway. Yet Germany and Greece\u2019s other creditors continue to demand that the country sign on to a program that has proven to be a failure, and that few economists ever thought could, would, or should be implemented.<\/p>\n
The swing in Greece\u2019s fiscal position from a large primary deficit to a surplus was almost unprecedented, but the demand that the country achieve a primary surplus of 4.5% of GDP was unconscionable. Unfortunately, at the time that the \u201ctroika\u201d \u2013 the European Commission, the European Central Bank, and the International Monetary Fund \u2013 first included this irresponsible demand in the international financial program for Greece, the country\u2019s authorities had no choice but to accede to it.<\/p>\n
The folly of continuing to pursue this program is particularly acute now, given the 25% decline in GDP that Greece has endured since the beginning of the crisis. The troika badly misjudged the macroeconomic effects of the program that they imposed. According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. They also believed that the first debt restructuring would lead to debt sustainability.<\/p>\n
The troika\u2019s forecasts have been wrong, and repeatedly so. And not by a little, but by an enormous amount. Greece\u2019s voters were right to demand a change in course, and their government is right to refuse to sign on to a deeply flawed program.<\/p>\n
Having said that, there is room for a deal: Greece has made clear its willingness to engage in continued reforms, and has welcomed Europe\u2019s help in implementing some of them. A dose of reality on the part of Greece\u2019s creditors \u2013 about what is achievable, and about the macroeconomic consequences of different fiscal and structural reforms \u2013 could provide the basis of an agreement that would be good not only for Greece, but for all of Europe.<\/p>\n
Some in Europe, especially in Germany, seem nonchalant about a Greek exit from the eurozone. The market has, they claim, already \u201cpriced in\u201d such a rupture. Some even suggest that it would be good for the monetary union.\u00a0 EU and Greece<\/a><\/strong><\/p>\n <\/p>\n <\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Joseph E. Stiglitz writes:\u00a0 European Union leaders continue to play a game of brinkmanship with the Greek government. Greece has met its creditors\u2019 demands far more than halfway. Yet Germany and Greece\u2019s other creditors continue to demand that the country … Continue reading ![\"EU](\"http:\/\/www.w-t-w.org\/en\/wp-content\/uploads\/2015\/06\/EU-Brinksmanship-with-Greece.jpg\")
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