It was the creditors who pushed Greece over the edge
If they had truly cared, the creditors could have easily prevented a default. Sadly, they found it more important to punish Greece and set an example.
Image: sticking posters for the NO campaign ahead of Sunday’s referendum.
On Tuesday, Greece became the first developed country to default on the IMF — and the pro-creditor camp is already propagating the convenient self-serving myth that the country’s “radical” and “irresponsible” government is somehow to blame for this. Nothing could be further from the truth.
To begin with, we should note that defaults come in many forms and guises — and not all of them are the debtor’s fault. In my own research on the political economy of sovereign debt, I identify at least four types of default: (1) negotiated reschedulings; (2) voluntary restructurings; (3) unilateral moratoriums; and (4) outright debt repudiations.
What is interesting about sovereign debt in general (and about international lending in particular) is the almost wholesale absence of repudiation. By and large, countries try extremely hard to repay their debts in full and on time — even when they cannot. In the worst case scenarios, they may be able to negotiate a rescheduling or restructuring of the debt with their lenders. In exceptional cases, countries can declare a moratorium on repayments. While this was very commonprior to World War II, it is extremely rare today.
In this respect, the first thing to note is that Greece clearly did not repudiate its debts outright: despite the preliminary conclusions of the Greek parliamentary debt audit committee, which found much of the country’s debt to be odious, illegitimate and illegal, the Syriza/ANEL government still formally recognizes the legally binding character of the debt contracts. Its IMF default therefore looks more like an undeclared moratorium: Greece could still settle its arrears with the Fund at a later stage if it somehow managed to secure new credit.
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