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Germans are justifiably angry at the Greek government for failing to live up to its obligations to repay debt that had been made as light as possible for the Greeks to pay off, with many extensions in between, but some folks are now blaming Merkel for her kindness to the Greeks that is now believed to have spoiled the Greek government into spending more than it could afford. |
The fault is not in Merkel, but in the system. It allowed easy credit in exchange for tariff-free trade. The obvious result is that a less competitive country is bound to end up borrowing on the easy credit, and buying as much as possible under the tariff-free trade, which was exactly what Greece did.
Tariff-free trade is not healthy for everyone. Nor is easy credit a favor to all. Weaker, more backward countries, need to have protective tariffs to dissuade its citizens from over-spending, and worse yet, borrowing on easy credit to over-spend with, a double whammy for the financial system. They also need the discipline of budgeting for the interest and principal payments, in order to not over-borrow as well.
Capital controls are necessary when major mistakes in the form of free trade and easy credit have already taken place, and are dictating the destiny of entire countries, pushing them mindlessly over the cliff that is sure to result in deaths by starvation, by exposure to the elements, by untreated sickness, and by violence in the streets. Malaysia instituted capital controls during the 1997 Asian Currency Crisis, while Indonesia did not, and the results were strikingly different. Malaysia survived the attack of Western speculative capital on her currency, while Indonesia was robbed and maimed by it. Those who preach against capital control for all countries either do not know what they are talking about, or know exactly what they are talking about, and do not mind that it isn't true. Every car needs a brake even if you do not use the brake to get anywhere (you use the gas pedal).
Merkel can save the Euro, save Germany, and save Greece by encouraging Greece to implement capital controls, and declare that as a creditor, she must pressure Greece to pay up at the earliest possible time, but that as a fellow European, she must support Greece's use of capital controls to make the most use of the remaining Euros that she has, to make sure it is used where it is most needed, such as in the purchase of medicines for its sick, food for its hungry, and shelter for its homeless. By buying time for the ECB, the IMF, and the Bundesbank, Merkel in effect is injecting liquidity to the frozen banking system. With capital controls, austerity becomes a challenge to achieve, rather than a punishment to avoid. This may yet be the best way to achieve the kinds of reforms that Germany wanted to see in Greece, except that this is now self-imposed by Greece on itself to survive with dignity. We can only wish the EU, Germany, France and Greece well, and hope that they will give themselves some more time, which provides a different form of liquidity that mere money cannot buy.