THE BLOG
01/13/2015 12:12 am ET Updated Mar 14, 2015

The Sovereign Debt of Greece Remains a Contentious Issue

A special European Synod should urgently settle the deepening controversy

The multiple admonishments in recent days between Athens and its increasingly hard line partners in Europe are out of place - even as part of a high-stakes game testing contrasting perceptions of dealing with Greece's bulging debt. Particularly in the midst of an already caustic election campaign in Greece and a snap national poll, due on Sunday 25 January, that is unlikely to help stabilize the country. Let alone help it to pay off debts.

Now seems to be the right moment for the leaders directly concerned here to seek a fresh viable solution relying instead on currently accepted principles of contemporary behavioural economics. Ignored with a vengeance by both sides so far, they grace both today's applied economic thinking and modern interdisciplinary accounting. And characteristically show that the sovereign debt of Greece does not in fact exceed €150b: down some 50 per cent from the astonishingly imagined all along €350b level - which would disturbingly raise the debt to 170 per cent of GDP.

This hardly unexpected conclusion follows unaided when we factor in, comprehensively evaluate and then accordingly take into account the massive damage, both in human and financial terms, caused by the misguided and also widely acknowledged as poorly researched "blind austerity policies" in Europe - exceptionally aggressively enforced in Greece during the past six difficult years.

It is not, therefore, a question here of merely "postponing" Greek debt payments coming due next year. Nor is it a matter, as mainly the hard-left opposition in Greece tends to postulate, of repudiating significant chunks of Greece's debt. It would certainly be more realistic if we seriously questioned instead - in good faith and in the context of a European Synod or Open Conference which would naturally include representatives of all parties involved plus third-party experts - the less than convincing absolutism promoted among others by Germany's finance minister, Wolfgang Schäuble, who as a protagonist of austerity insists that "all previously agreed Greek debt must be paid in full regardless of the composition of the next Greek government."

Such a proposition of necessity remains largely untenable. Because first we would have to establish institutionally, as suggested, what the net remaining Greek debt is - after downward adjusting it to compensate for, say, the shocking and still rising rates of hunger, suicides and lethal levels of unemployment that are already practically eviscerating the social and economic fabric in Greece. Driven by the devastating momentum of continuing austerity responsible also for the endemically collapsing aggregate demand in the eurozone's longest suffering country with steadily vanishing prospects of growth - generally prevalent elsewhere in Europe, too.
And threatening nowadays to bring yet closer Europe's Grande Démise as the euro persists depreciating and the eurozone slides deeper into deflation.