Jacob Soll, a professor of history and accounting at the University of Southern California, is the author of “The Reckoning: Financial Accountability and the Rise and Fall of Nations.” His opinion piece appeared in the New York Times print and online edition on July 15, 2016.
A DEAL has finally been reached that could keep Greece in the eurozone. Few are happy with the outcome. We’ve heard a lot about how the Greeks feel humiliated. But we’ve heard less about German anger, and we know they are angry. Finance Minister Wolfgang Schäuble was reported to have started yelling during Saturday night’s negotiations. France and Italy have both made huge loans to Greece, but neither country has expressed hostility to Greece. Why is Germany so angry?
As an economic historian, I got a taste of this resentment during a conference on Greek sovereign debt held in Munich last week. It took place at the Center for Economic Studies and the Ifo Institute, which are headed by Hans-Werner Sinn, the German economist and longtime proponent of a Grexit. The conference included economists, accountants, journalists, investors and government officials from both Greece and Germany. Diverging views were aired by Mitu Gulati, the Duke law professor who helped devise an earlier Greek bailout; by Ashoka Mody, an economist, formerly of the International Monetary Fund, who preaches debt forgiveness; by accounting experts, who agreed that Greece’s total debts seem to have been inflated; and by Mr. Sinn.But when the German economists spoke at the final session, a completely different tone took over the room. Within the economic theories and numbers came a moral message: The Germans were honest dupes and the Greeks corrupt, unreliable and incompetent. Both parties were reduced to caricatures of themselves. We’ve heard this story throughout the negotiations, but in that room, it was clear how much resentment shapes the views of German economists.
Clemens Fuest, of the Center for European Economic Research, who has advised Mr. Schäuble, kept reciting numbers about Greek debt and growth, and said the Greeks had failed at every level over the past several years to manage their debt. He believed they should simply be thrown out of the eurozone. Henrik Enderlein, of the pro-European Jacques Delors Institute, said that Greece should stay in the eurozone, but only if it applied more austerity and better management. Daniel Gros, director of the Center for European Policy Studies, theorized that Greek debt and economic woes could be countered only with better export numbers.
All points were important, but to hear it from these economists, Germany played no real part in the Greek tragedy. They handed over their money and watched as the Greeks destroyed themselves over the past four years. Now the Greeks deserved what was coming to them.
When I pointed out that the Germans had played a major role in this situation, helping at the very least by insisting on austerity and unsustainable debt over the last three years, doing little to improve accounting standards, and now effectively imposing devastating capital controls, Mr. Enderlein and Mr. Fuest scoffed. When I mentioned that many saw austerity as a new version of the 1919 Versailles Treaty that would bring in a future “chaotic and unreliable” government in Greece — the very kind that Mr. Enderlein warned about in an essay in The Guardian — they countered that they were furious about being compared to Nazis and terrorists.
When I noted that no matter how badly the Greeks had handled their economy, German demands and the possible chaos of a Grexit risked political populism, unrest and social misery, they were unmoved. Debtors who default, they explained, would simply have to suffer, no matter how rough and even unfair the terms of the loans. There were those who handled their economies well, and took their suffering silently, like Finland and Latvia, they said. In contrast, a country like Greece, where many people don’t pay their taxes, did not seem to merit empathy. It reminded me that in German, debt, “schuld,” also means moral fault or blame.
When I asked if any had visited Greece to assess poverty, brain drain and business closings, they simply shook their heads. When I asked what responsibility these leading economists felt in the Greek crisis, they told me that I could not understand the situation by simply flying in from the United States. (For the record, I have spent much of the year in Europe, meeting with the previous Greek government in Athens — where I saw hungry old people rummaging in trash cans — and later with members of the European Commission in Brussels.)
When the panel split up, German attendees circled me to explain how the Greeks were robbing the Germans. They did not want to be victims anymore. While I certainly accepted their economic points and, indeed, the point that European Union member countries owe Germany so much money that more defaults could sink Germany, it was hard, in Munich at least, to see the Germans as true victims.
Here lies a major cultural disconnect, and also a risk for the Germans. For it seems that their sense of victimization has made them lose their cool, both in negotiations and in their economic assessments. If the Germans are going to lead Europe, they can’t do it as victims.