Dr Holger Schmieding, chief economist at Berenberg, says Yes
Rarely has a new government done so much damage so fast. Without actually passing many laws, the left-right radicals in Athens have scared Greek savers and entrepreneurs so badly that about €60bn in capital has fled the country within six months, equal to one third of Greek GDP.
Comparable to what could be expected of, say, a coalition of Ukip with Britain’s Greens, their policy proposals have insulted common sense. Even worse, they have lashed out at the only willing creditors Greece has, accusing the IMF of “criminal responsibility” for their own malaise.
That is not the way to get a new credit from the only bank still willing to talk to you. By causing massive capital flight and pushing Greece back into a Tsipras recession after the Samaras recovery of 2014, the rulers in Athens have weakened their public finances and their bargaining position. Restoring fiscal health will now be much more painful than it would have been otherwise.
Sam Bowman, deputy director at the Adam Smith Institute, says No
Greece has been badly mistreated by the rest of the EU. The structural reforms demanded by the Troika are desirable, though difficult in the current economic climate, but Greece has already cut state spending by 20 per cent and cut state employment by 30 per cent.
Greece has been running a primary surplus since 2013, and most of the €240bn in bailout money lent to the country was intended to service existing debt. Irresponsible borrowers, which Greece undoubtedly was, need irresponsible lenders too. At the onset of the crisis, European banks owned nearly $54bn of Greek government debt, and a Greek default would have damaged many of them. These were bailouts for Europe’s banks, not just for Greece.
The Eurozone’s refusal to restructure Greece’s debt, perhaps indexing it to nominal GDP as Greece’s finance minister has suggested, is therefore highly unreasonable. Greece has been at fault, but so have many other players in this sorry saga.