Death by Debt: My Response to The German Finance Ministry, by Jeffrey Sachs

Economic advice without political insight is curse. Lessons to learn: „My point is that believing that indebted sovereign governments should always service their debts is a good working principle nine-tenths of the time, but can be a disaster the tenth time around. We must not push societies to the breaking point, even when they have only themselves to blame for their indebtedness.

Did postwar Germany “deserve” the Marshall Plan? No. Was the Marshall Plan and the 1953 debt agreement wise policies to give Germany a fresh start? Yes. Did Russia “deserve” debt relief in 1992? No. Would it have been wise to offer Russia such relief? Yes.

Does Greece “deserve” debt relief? No. The Greek economy has been badly managed for a long time. Would debt relief for Greece be a good idea? Yes“

Yanis Varoufakis

Dr. Ludger Schuknecht, senior economist at the Germany Finance Ministry, explains his ministry’s viewpoint regarding Greece. This viewpoint essentially holds that Eurozone countries should live within their means; adjust to their debt burdens; and take their reform medicine as needed. If they do so, they will be successful, as illustrated by Ireland, Spain, and Portugal. Greece has only itself to blame, and indeed was on track to recover as of late 2014 if it had not deviated from its course.  

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