Why German Economic Thought Made the Greek Crisis Inevitable

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“Contrary to popular misconception, rules were not meant to be broken”

Yesterday, after months of negotiations, Greece’s Syriza government relented to the demands of its creditors and offered a set of “reforms” in exchange for continued loans. This reform package, which essentially matches the content of the draft plan Greek voters voted down on Sunday’s referendum, will force the country to slash pensions, make further budget cuts, and adopt a series of regulatory changes designed to make the Greek economy more “competitive.”

In the lead up to Sunday’s referendum, many observers hoped that a decisive vote against the proposed measures would force the Troika—Greece’s creditor institutions, the European Commission, European Central Bank, and International Monetary Fund—to compromise their hardline stance in favor of continued austerity. The IMF’s announcement last week that Greece would need an additional €60 billion in debt relief and 20-year grace period on debt repayments seemed…

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