Most salient point: Without official creditors, the unavoidable austerity is even harsher. See also my blog “Μνημόνιο για cocktail parties”
Amartya Sen writes on austerity, comparing the futility of the Troika extracting primary surpluses from Greece and its other debtors to the self-defeating strategy of the Entente powers extracting reparations from Germany, the subject of a blistering critique in Keynes’ ‘Economic Consequences of the Peace’.
But he chooses not to explain the real nature of the bargain. He asks why ‘structural reform’ should be paired with austerity. Especially, as many contend, the latter makes it harder to carry out the former.
What is actually happening is that debtors are offered a range of possibilities. At one end is the option of getting no more funding at all, in return for which the debtor country can run itself as it wishes, but under its own steam, and in this case coping with default, capital controls, and perhaps exit from the Euro. Then beyond that there is a sliding scale of increasing…
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