Greece - IMF Channels Keynes

In The Economic Consequences Of The Peace, his seminal work written after having seen the short-sighted and vengeful mood of the victorious Allies towards Germany at Versailles, John Maynard Keynes argued forcefully that there were limits to the reparations - enforced debt repayments, if you will - being demanded from the losing side as the price for having the blame for The Great War imposed upon it.

Keynes was, as he was again over Mr Churchill’s Mistake in 1925, absolutely right: the demands for repayments that Germany could not make, as its economy could not generate sufficient funds to do so, only served to fuel resentment and the rise of extremism. Where that led Europe was the Third Reich, and yet another war, after the population though they had already fought “The war to end all wars”.

That analysis may have helped the worthies at the International Monetary Fund (IMF) come to the conclusion that the demands being heaped upon the Greek Government by its creditors are also unsustainable: political instability in that country has already helped a virulent right-wing party, Golden Dawn, gain ground in national elections. Instability was another consequence of the demands on inter-war Germany.

With the Syriza administration in Athens calling a referendum on the bailout terms that lenders are seeking to impose on Greece next Sunday, the IMF has blinked first. As the Guardian has told, “IMF says Greece needs extra €50bn in funds and debt relief … International lender issues strong message to Europe by warning that Athens’ debts are unsustainable and it needs 20-year grace period on debt repayments”.

There was more: “Fund officials said they would not be prepared to put a proposal for a third Greek bailout package to the Washington-based organisation’s board unless it included both a commitment to economic reform and debt relief … According to the IMF, Greece should have a 20-year grace period before making any debt repayments and that final payments should not take place until 2055”.

Someone has looked at the plight of the Greek people - all too many of them cannot even afford to eat right now, and the economy has shrunk year on year since the current crisis hit - and seen that they first of all need help. This was, of course, what happened to Germany, and other European nations, after the second world war, as the USA implemented the Marshall Plan. With that, Europe recovered.

The concept of a “Eurozone Marshall Plan”, to help the economies of those southern European countries most seriously affected, has been broached before. Perhaps Greece is going to help get that idea back on the table, and soon. Some, including the Germans, may balk at the idea of debt relief and assistance to other countries. They have short memories: once upon a time it was they who were on the receiving end.

All we need is for someone to show leadership. Volunteers are no doubt welcome.