America’s Greece: Fixing Puerto Rico Could Provide Answers for Europe

Published on Spiegel Online International, an Essay by Barry Eichengreen, July 8, 2015.

The Greek crisis could have been stopped years ago if European politicians hadn’t been so stubborn. They should have followed the example set by the United States in dealing with Puerto Rico’s problems.  

In Puerto Rico, the United States now has its own version of Greece. The territory’s debts are unsustainable. Public employment and pensions are swollen. Work in the underground economy, where taxes are evaded, is rife. Modern infrastructure is lacking. The commonwealth exports little for an economy of its size. Many of the best and brightest have decamped in search of better opportunities. Since these problems were a long time in the making, fixing them will take years … //

… They allowed the interests of their banks to trump those of the Greek people, refusing to contemplate serious debt reduction for Greece when this was called for in 2010. As self-justification, they elevated the idea that debts must be paid to the status of a theological belief … //

… Catastrophic Management:

In fact there was nothing inevitable about this disastrous turn. It is a result of the catastrophic way the crisis was managed. With a little bit of intellectual flexibility, the crisis could have been resolved in 2010, had Greece been offered debt reduction in return for deep structural reform. The country would have avoided the 25 percent decline in gross domestic product it has experienced since 2007. Disaffected voters would not have felt obliged to punish their political class by electing a set of radical neophytes. Europe would have been able to put the Greek crisis behind it and get back to business.

The US Congress will now pass legislation giving Puerto Rico access to American bankruptcy courts. Its debt will be restructured, and all those reckless enough to have lent it money will see their claims radically written down. Once the island’s government, relieved of its crushing debt burden, responds with reforms, the US will provide further aid.

But Puerto Rico will be at most a sideshow. The real focus for policymakers will be growing the US economy. They will offer suggestions for how to deal with the country’s inequality and violence problems. They will pursue a foreign policy agenda intended to cope with a more assertive China, a more aggressive Moscow and a more destructive Islamic State.

As for whether they succeed, we will have to wait and see. One should not underestimate the ability of US politicians to get it wrong. But Puerto Rico will remain only a minor distraction. One wishes the same could be said of Greece.

(full text).

(Barry Eichengreen (born in 1952) is a professor of economics and political science at the University of California, Berkeley).


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Greece should reject the Eurozone’s latest ultimatum, on, by Jerome Roos, July 8, 2015: Just two days after Greek voters rejected their creditors’ ultimatum, Tsipras is given another one. It’s time to follow the people’s lead and say NO;

Kurdish Women’s Radical Self-Defense – Armed and Political, on teleSUR, by Dilar Dirik, July 7, 2015: the Kurdish women’s resistance operates without hierarchy and domination and is part of larger, societal transformation and liberation;

Opinion: Merkel Must End Devil’s Pact with America, on Spiegel Online International, by Markus Feldenkirchen, July 7, 2015: Following the latest revelations about surveillance by the United States on the German government and media, it is high time for Chancellor Angela Merkel to take action against the systematic spying. Enough is enough, American spying on Germany is killing the friendship between the countries …;

Greece’s resounding OXI shakes Europe to the core, on, by Jerome Roos, July 6, 2015: The outcome of Sunday’s historic referendum marks a historic victory for people power — but with euro exit looming, Greece’s future remains wide open;

Geduld am Ende – Großer Knall um Griechenland HD, 57.52 min, von HDTV mediathek am 18. Juni 2015 hochgeladen … bei Maybrit Illner, am 18.06.2015.

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