But the point remains that what is left is unserviceable without radical reform of the Greek economy that permits it to grow again, and that reform is not possible unless existing debt is written off. That’s because without that write off all the money needed to invest for growth will instead go in debt servicing.
Long ago the reality of this type of crisis was recognised in the commercial insolvency world. What Greece is in is best described as a classic receivership situation where there is a surviving activity well worth preserving (it’s a country, after all) but where any chance of it prospering is prevented by debt burdens that are the consequence of past mistakes. In the commercial and personal world, and even for some forms of local government, we pragmatically allow such restructuring because whilst no one wants to see non-payment of debt we prefer that to no payment at all and the continuation of a struggling entity always tottering on the brink of potential failure.
We need to recognise than that if Greece was a company a pre-packaged insolvency would probably solve most of its problems, in days. It is time we did the same for countries. But don’t hold your breath because bankers object to this, largely because the guarantee that countries won’t fail is what they think underpins their own risk, and the last thing they want to do is accept responsibility for that.
So Greece must suffer when glaringly obviously a better solution can be and should be found. In the commercial world you might call that professional incompetence. Internationally it’s just callous. But no one is listening.
That’s always been the standard IMF solution. Debt writedown, internal reforms and devaluation. This has been the standard wisdom for many decades. It’s only the euro itself that prevented the same thing being done in Greece.
Let’s put the blame where it belongs here. We’ve always known what to do. It’s only that European Union project that prevented us doing what we all knew how to do in the first place.
But then with Ritchie obviously angling for an EU contract he’s not going to say that, is he?