by Jeremy Bulow & Kenneth Rogoff
Wall Street Journal
April 16, 2015
In the court of world opinion, a large majority seems to believe that even if the Greeks may have been a tad fiscally irresponsible, it is the Germans who have driven Greece into depression through cruel insistence on austerity and debt repayments.
This populist narrative misses the essence of the problem: The Greeks are experiencing an emerging-market debt crisis, albeit one on steroids. Those convening in Washington, D.C., this week for the spring meeting of the International Monetary Fund might want to keep in mind that Greece’s problem is not simply the straitjacket of the single currency. The euro has fallen by 13% over the past year against an effective index of eurozone trading partners, yet Greece is hardly booming.
The deeper issue is that European integration by design has reduced the independence of European Union member states legally, fiscally and politically. Interdependence helped Greece run up debts far in excess of a normal advanced emerging-market country, but it is now making these debts devilishly difficult to unwind.